Forfeiture of Residential Land Contracts in Ohio: The Need for

FORFEITURE OF RESIDENTIAL LAND CONTRACTS

IN OHIO: THE NEED FOR FURTHER REFORM

OF A REFORM STATUTE

by

JAMES GEOFFREY DURHAM*

I. INTRODUCTION

N THE LAST SEVERAL YEARS, the use of long-term installment land contracts forthe sale of residential real property in Ohio has increased greatly.' This

trend can be viewed as either positive or negative depending on one's view ofthe importance or desirability of the use of land contracts. In either case, itis troubling that Ohio's unique statute, which specifically defines the rights ofa vendor upon breach of a land contract by the vendee when the real propertyis improved by a dwelling,2 is potentially unfair to the vendee.

In providing remedies for a vendor of a residential land contract whenthe vendee is in default, the Ohio statute divides residential land contracts intotwo groups: those which have been in effect for less than five years and onwhich less than 2007o of the purchase price has been paid,3 and those whichhave been in effect for five years or more or on which 2007o or more of thepurchase price has been paid." In the former situation the vendor may obtainforfeiture and damages by bringing one or more actions against the vendee.,In the latter situation the vendor must foreclose the vendee's interest using thestatutory procedure for judicial foreclosure of a mortgage.' Remedies for ven-dors of land contracts concerning property not improved by a dwelling are leftto case law, and forfeiture may or may not be allowed. 7 While one may ques-

*Assistant Professor, The University of Dayton School of Law; A.B., University of California, Berkeley;

J.D., University of California, Davis. The author gratefully acknowledges the invaluable editorial assistance

of his spouse, Joan Drake Durham, Attorney at Law. In addition, the author gratefully acknowledges

the research assistant of Robin Ames, Class of 1983 of The University of Dayton School of Law, and

the comments made by Professor Lillian BeVier of the University of Virginia School of Law and ProfessorGrant Nelson of the University of Missouri, Columbia, School of Law.

'See infra text accompanying notes 75-96.'OHio REV. CODE ANN. §§ 5313.01-. 10 (Page 1981). [Chapter 5313]

'OHio REV. CODE ANN. §§ 5313.06, 5313.08 (Page 1981).

'OHIO REV. CODE ANN. § 5313.07 (Page 1981).

'OHIo REV. CODE ANN. §§ 5313.06, 5313.08 (Page 1981). While it would appear that the doctrine of res

judicata requires a vendor to bring one action for both forfeiture and damages if he sought both remedies,

an Ohio appellate court has held that a vendor may seek forfeiture in one action and later sue for damages

in another action. Marvin v. Stemen, 68 Ohio App. 2d 26, 426 N.E.2d 205 (Lucas Co. 1980).

'OHIO REV. CODE ANN. § 5313.07 (Page 1981).

'See infra text accompanying notes 188-225.

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tion whether it is equitable to allow forfeiture in any instance,8 current economicrealities make the distinction drawn by the Ohio statute inequitable; there is,therefore, clear need for either legislative amendment of Ohio's current lawor broad use by trial courts of their equitable power to fashion appropriateremedies in land contract default cases.

Perhaps it could be argued that in 1969 when Chapter 5313, InstallmentLand Contracts (the "Act"), was enacted,9 a vendee who had paid less than20% on a land contract or whose land contract had been in effect less thanfive years'" had so small an interest that forfeiture was an equitable remedy.This argument would have been strengthened by the fact that the Act, whenoriginally passed, was limited to situations where the purchase price was lessthan $30,000." Such a view would have been very much in accord with thelong-time scholarly perception that land contracts are primarily used by low-income buyers.' 2 If it were true in 1969, it is clearly not the case today. The$30,000 limitation was removed in 1980,'1 and the economic interests of mostOhio land contract vendees appear to be quite large" and worth protecting.In addition it is equally clear that land contracts are being used more and moreby middle and upper income buyers and sellers to avoid high mortgage interestrates charged by commercial lenders."

The purpose of this article is to examine the problems created by the Act.In order to do that, the article begins with a background section which morefully describes the type of contractual arrangement under discussion,' 6 whypeople use land contracts,' 7 and the economic factors in the current Ohio realestate market which have caused an increase in the use of land contracts andmay cause mounting problems with Ohio's land contract statute. 8 The secondsection describes the common law treatment of land contract defaults and thepositions taken by states other than Ohio.' 9 The next section discusses Ohiolaw both before and after passage of the Act, along with the history of the

'See infra text accompanying notes 264-75. This article does not deal with the deeper questions of thetrue fairness of forfeiture and the true efficacy of foreclosure. The focus of the article is on whether andwhen forfeiture of land contracts should be allowed given the fact that a mortagee must always foreclosein order to realize on his security.

'1969 OHIo LAWS 424, 424-30 (effective Nov. 25, 1969).

'This would mean that upon the vendee's default the vendor could avail himself of the forfeiture remedycontained in OHIo REV. CODE ANN. § 5313.06 (Page 1981).

'1969 OHIO LAWS 424, 424-30 (effective Nov. 25 1969) (current version at OHIO REV. CODE ANN. §5313.01(B) (Page 1981)).

"See infra text accompanying notes 65-74.

"OHIO REV. CODE ANN. § 5313.01(B) (Page 1981) (effective Oct. 6, 1980).







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RESIDENTIAL LAND CONTRACTS

Act."0 The last section considers the various policies raised in the prior sec-tions and contains proposals for both legislative and judicial action.2"

II. LAND CONTRACTS AND ECONOMIC REALITIES

A. Defining the Scope of "Land Contracts"

The term "land contract" can mean several different things, dependingon the jurisdiction being referred to and the context in which it is used. Perhaps

the best way to define what a land contract is in real estate finance law is to

say that it is not "the ordinary executory contract for the sale of land, variouslyknown as a 'binder,' a 'marketing contract,' or an 'earnest money' contract." 22

These types of agreements are designed to bind the parties for a short periodof time, usually one or two months, while the parties arrange for the closing

of the sale of the property. 3 These agreements usually allow for terminationof the relationship between the seller and the buyer with the conveyance of

title by deed from the seller to the buyer in exchange for the buyer's tender

of the entire purchase price. ' Alternatively, the seller may choose to participatein the buyer's financing of the property either by accepting a mortgage or a

deed of trust or by entering into a land contract. 5

The true "land contract" goes by many names, including installment land

contract, contract for deed, and long-term land contract,26 or the all-inclusive

one chosen at the beginning of this article, long-term installment land contract.A "land contract" is all of these and more.

A land contract is "long-term" because the parties usually anticipate a

relationship of several years, from one or two years to twenty years or more.27

It is "installment" because the vendee usually makes periodic payments of

interest alone or of the principal and interest to the vendor.2" Finally, it is a

land contract or "contract for deed" because the vendor retains title and is

only obligated to convey title to the vendee upon the vendee's full compliancewith the terms of the contract, the most important being timely payment of

all money due the vendor.29 Ohio's definition of "land installment contract"


'See infra text accompanying notes 264-303.

"Nelson & Whitman, The Installment Land Contract - A National Viewpoint, 1977 B.Y.U.L. Rev. 541.

"Id. at 542.1"This could be accomplished either by tender of the total purchase price in cash, or by tender of the seller's

equity (the difference between the purchase price and the amount owed by the seller to a third party and

secured by the property being sold) in cash by the buyer and the buyer's assumption of the seller's existingindebtedness secured by a mortgage of deed of trust on the property.

"Nelson & Whitman, supra note 22, at 542. In that case, the parties will have two "contracts," a "binder"and a "land contract."

1"Id. at 541.27Id.

21id.

"Id. The vendor will probably also be obligated to make payments to any mortgages while the land contractis in force.

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AKRON LAW REVIEW

includes all of these ideas:

"Land installment contract" means an executory agreement whichby its term is not required to be fully performed by one or more of theparties to the agreement within one year of the date of the agreement andunder which the vendor agrees to convey title in real property located inthis state to the vendee and the vendee agrees to pay the purchase pricein installment payments, while the vendor retains title to the property assecurity for the vendee's obligation. Option contacts for the purchase ofreal property are not land installment contracts.30

B. Reasons for Using Land Contracts

A land contract fulfills most of the same functions as a purchase moneymortgage3 given to the seller.32 The primary differences between the two arethe remedies which the vendor/mortgagee has upon default by thevendee/mortgagor.II Historically, the remedies were similar. Upon a vendee'sdefault a land contract vendor was traditionally allowed forfeiture, the legallyeffective declaration by the vendor that the vendee's interest was terminated.3

Similarly, a common law mortgage deed originally put title in the mortgageeand the mortgagor retained only the opportunity to regain title on the "lawday" by repaying the amount loaned; if he failed to repay the loan on the lawday, he lost his only chance to regain title to "his" property.35

The situation has now changed. The rights of a mortgagee have eroded,first by equitable redemption, then by allowing strict foreclosure and now bythe requirement for either judicial or power of sale foreclosure.36 This equitablerequirement of foreclosure is absolute. Today it is fair to say that strictforeclosure is allowed only in very limited situations37 and that no court willallow a mortgagor, in the mortgage or contemporaneously with its execution,to waive either foreclosure by sale or his ability to redeem his property priorto foreclosure.3" A mortgagor may relinquish his interest to the mortgagee bydeed after default, but even then a court will scrutinize the parties' relation-

"OHIO REV. CODE ANN. § 5313.01(A) (Page 1981).

"The terms "mortgage" and "deed of trust" will be used interchangeably in this article.

"Nelson & Whitman, supra note 22, at 541. The only possible exception is the unrecorded land contract,

which may leave the vendor's mortgagee and the general public without knowledge of the sale.

"This assumes that the transaction is a legitimate one where the contract is either recorded or the vendor

is not trying to take advantage of the vendee. In addition there are problems regarding title and vendee's

remedies which this article will not address. See generally G. OSBORNE, G. NELSON and D. WHITMAN. REAL

ESTATE FINANCE LAW § 3.25 (1979) [hereinafter cited as OSBORNE]; 3 A. CASNER, AMERICAN LAW OFPROPERTY §§ 11.74-75 (1952); Mixon, Installment Land Contracts: A Study ofLow Income Transactions,

with Proposals for Reform and a New Program to Provide Home Ownership in the Inner City, 7 Hous.

L. REV. 523 (1970).

"See OSBORNE, supra note 33, § 3.25; 3 A. CASNER, supra note 33, § 11.75.

"OSBORNE, supra note 33, § 1.2, at 7; 4 A. CASNER, supra note 33, § 16.178, at 427.

"OSBORNE, supra note 33, § 1.4, at 9; 4 A. CASNER. supra note 33, §§ 16.184-185.

"OsBORNE, supra note 33, § 1.4 at 9.38Id.

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ship to determine if the transaction was fair to the mortgagor.39

This raises the anomaly of forfeiture of land contracts. Although the rightsof mortgagees have been severely limited and land contracts and mortgagesperform essentially the same basic functions,"0 the concept of forfeiture by aland contract vendor persists almost unchecked in some jurisdictions, is limitedby legislative or judicial action in others, and has been buried in a few."' Aslong as forfeiture exists in some form, it serves as an inducement for a sellerto finance or assist in financing his buyer's purchase by using a land contractrather than a mortgage. 2

Beyond the traditional advantage of forfeiture, however, at least three addi-tional modern reasons have arisen for use of land contracts."3 One importantreason for using a land contract is the favorable treatment for capital gainsfrom the sale of real property under federal tax laws contained in section 453of the Internal Revenue Code, the so-called "Installment Sale" section." Section453 requires a seller of real property, who does not elect otherwise, to propor-tionately recognize any gain realized from the sale of an asset in the year oryears in which the seller receives part or all of the consideration for the sale."5

"Id. at § 6.16.

"See infra note 43.'See infra text accompanying notes 98-183.4'This seems almost indisputable. Although it is generally agreed that when a person or business entitymakes a loan the last thing desired is default and realization on the security, it is obvious that the lenderwill choose the security device which will most easily allow him to recoup his investment. Since mostforeclosure sales of real property result in the mortgagee's buying to protect his investment, if land contractforfeiture is allowed it clearly makes the land contract more desirable as a security device than a mortgagebecause the lender avoids the delay and cost of a foreclosure sale.

"The "reasons" which follow are perhaps more a matter of perception than reality. Each can arguablybe accomplished by the seller of real property accepting a mortgage from his buyer, be it a first mortgage,a junior mortgage, or a "wrap-around" mortgage. A wrap-around mortgage most resembles a land contractin that the seller continues to be obligated to make timely payments on any mortgages in existence beforethe closing of his sale to the buyer, but it is different in that the seller conveys title and the seller's mortgageis junior to any existing mortgages. The wrap-around mortgage is in many ways preferable to the landcontract, as title is in the buyer and the deed and mortgage will be recorded. The drawback is that if thebuyer defaults, the seller is forced to foreclose his lien as a mortgage rather than use any "simpler" methodoffered by a jurisdiction's land contract law. In jurisdictions where the procedure for terminating a vendee'sinterest under a land contract most resembles the foreclosure procedure for a mortgage, the only reasonfor using a land contract may be that those structuring the transaction either are not aware of what awrap-around mortgage is or prefer to use a more "familiar" device, the land contract.

"I.R.C. § 453 (West Supp. 1982).

"l.R.C. § 453(a)-(d) (West Supp. 1982). Until the changes made in 1980 to I.R.C. § 453, a seller of realproperty had to elect installment treatment if and only if he (1) received less than 30 percent of the salesprice in the tax year of sale and (2) received part of the sales price in at least two separate tax years. SeeI.R.C. § 453 (1976 and Supp. 11 (1978)), amended by Installment Sales Revision Act of 1980, Pub. L.No. 96-471, § 2(a), 94 Stat. 2247, 2247-51 (1980) and by Economic Recovery Tax Act of 1981, Pub. L.No. 97-34, Title ii, § 202(c), 95 Stat. 172, 221 (1981) (codified at I.R.C. § 453 (West Supp. 1982)). Forsales occurring on or after October 20, 1980, the 30 percent rule has been abolished; an installment occurswhen the vendor receives any part of the sales price in any year other than the tax year of sale. See I.R.C.§ 453 (West Supp. 1982) and the Committee Report on Public Law No. 96-471, S. Rep. No. 1000, 96thCong., 2nd Sess., reprinted in 1980 U.S. CODE CONG. & AD. NEWS 4696. These changes make it mucheasier to effect an installment sale, with its attendant possibilities for tax savings. Gain realized on thesale of a personal residence may be treated as an installment sale. Rev. Rul. 75, 1953-1 C.B. 83.

Winter, 19831

This gives the seller a method of saving federal income taxes by using a landcontract rather than selling his property for all cash upon closing.46

A single example will best illustrate the potential savings. Suppose the salesprice for a house is $100,000 but the seller's basis in the house is $60,000, whathe paid for it. If the buyer pays cash and if the seller does not purchase a moreexpensive house within twenty-four months,47 the seller must recognize in theyear of sale, for federal income tax purposes, his realized gain of $40,000,the difference between the sales price and his basis. 4

1 If, on the other hand,he sells by a land contract with a $30,000 down payment, he will only haveto recognize as gain part of the $30,000 received in the year of sale, not the$40,000 gain he has realized in making the sale; his recognition of the remainderof his realized gain will be spread over future years in proportion to the amountof the sales price he receives in those years.49

In this example, if we assume that the seller is in the maximum tax bracket,50%, it will mean that he will receive in the year of sale $30,000 cash and onlyhave to pay $2,400 in federal income taxes.5" Each year in which the sellerreceives part of the sales price he will also receive much more cash than theamount he is obligated to pay as federal income taxes. 5' The effect is furtherenhanced if, by spreading a gain over two or more years, the taxpayer stays

"This is not to imply that a buyer will be able to buy the property without borrowing money. However,if the buyer obtains financing from a third party, for example, a new first mortgage from a bank, orassumes the seller's existing mortgage, the seller will be deemed to have received the entire sales pricein the tax year of sale because he will either pay off any existing load or be relieved from the obligationof paying it by the buyer's assuming it. Any realized gain resulting from a sales price in excess of theseller's basis in the property-must be recognized.

'7 I.R.C. § 1034(a) (West 1982) allows a seller to postpone any gain on the sale of a personal residenceif he buys another personal residence of at least equal value within 24 months. If he purchases a houseof lesser value, but one that has a value that is higher than his basis in the house just sold, he must recognizethe gain to the extent that the sales price, less selling expenses, exceeds the higher of his basis in the housejust sold or the purchase price of the new house. Id.

"For simplicity, this assumes there were no costs of selling, which of course would be deductible andlower the taxable gain and provide a deduction from ordinary income. I.R.C. § 1034(a) (West 1982) (capitalgain deduction) and I.R.C. § 1034(b)(2)(C) (West 1982) (ordinary income deduction). The gain wouldprobably be a capital gain and be reduced to 40% of the full gain. I.R.C. § 1202(a) (West 1982).

"The gain that would have to be recognized in any one year is determined by multiplying the total gain(in the example, this would be determined by subtracting basis from sales price, or $100-000 - $60,000- $40,000) times a percentage derived by dividing the total amount received in one year by the sales price

(in the example for the year of sale this would be $30,000 - $100,000 = 30%). In the example this wouldresult in recognition of a capital gain in the year of sale of $40,000 x 30% = $12,000. I.R.C. § 453(c)(West 1982). The seller would therefore receive $30,000 in cash and only have to pay tax on $12,000 atthe capital gain rate. With the current federal tax system of progressive taxation and deductions, a taxpayercould obviously benefit from "spreading" a gain over two or more tax years; he may have more deductionsin a future tax year, or, perhaps in combination with deductions, it may keep him in a lower tax bracket.

"$2,400 in tax is derived by applying the capital gain exclusion of 60% to the $12,000 gain which resultsin a taxable amount of $4,800 ($12,QOO - (60% x 12,000) = $4,800). I.R.C. § 1202(a) (West 1982).Since we are assuming that the seller is being taxed on this income in the 50% bracket, he will pay $2,400in federal income tax ($4,800 x 50% = $2,400).

"Suppose he receives $10,000 in the second year. His tax will be $800. Using the equations from notes49-50, supra, $800 is derived as follows: $40,000 x ($10,000 - 100,000) = $4,000 gain; $4,000 - (60%x $4,000) = $1,600 taxable gain; and applying a 50% bracket, $1,600 x 50% = $800. This goes onuntil the land contract is fully paid and terminated.

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below the 50% bracket. 2 A land contract which qualifies as an installmentsale for federal income tax purposes can therefore have a dramatic effect onhow much federal income tax is paid by the seller.

The seller usually also gains a financial advantage from a land contractif there is a mortgage on the property. In the last several years interest rateson home mortgages have skyrocketed, ranging as high as 18% in 1981." Ifthe land contract allows the seller to leave an old, low interest rate mortgageencumbering the property during the term of the land contract, the seller willrealize on the money he actually has at risk a rate of return greater than thestated interest rate on the land contract.54

Most interestingly, the seller may be able to create a very favorable invest-ment for himself while offering a bargain to the buyer. Using the same basicexample of a $100,000 sales price, suppose the seller's existing mortgage balanceis $40,000 with an 8% per annum interest rate and that the land contract pro-vides for a $30,000 down payment and interest on the $70,000 balance of 12%per annum. Although the stated interest rate on the land contract is 12%, abargain for the buyer, the effective yield for the seller on his "investment"of $30,000 is 17.3%; the seller gets the "spread" between the 876 he pays thebank for the amount he owes the bank, $40,000, and the 12% the buyer ispaying him for the "same" $40,000 in addition to 12% on the seller's $30,000."1An interest rate of 17.3% is a solid return on the seller's investment.56

Last, but perhaps most important, offering a land contract may help theseller find a buyer because the buyer's cost of buying the house is obviouslyless if he spends less on financing.57 In addition, even if the seller has buyersavailable, he may be able to get a higher price for his house by using a landcontract.

"See supra note 49."Dayton Area Mortgage Rates, Dayton Daily News, Sept. 27, 1981, at 10-E, col. 1.4"Money he has at risk" means the seller's equity in the property or sales price still unpaid by the vendee

less current mortgage balance.

"The seller has $30,000 of "his" money at risk, the $70,000 "loaned" to the buyer less the $40,000 theseller has borrowed from the bank. The seller is receiving $8,400 in interest per year, 12% x $70,000.The seller is paying the bank $3,200 in interest per year, 807o x $40,000. He is netting $5,200, or $8,400- $3,200, on an investment of $30,000 of his money, for an effective interest rate of 17.3%, or $5,200+ $30,000. Note that the less of "his" money the seller has at risk, the higher the effective interest the

seller receives. If the down payment in the example is lowered to $20,000, the seller has $40,000 at riskand his effective return is 160o. If the down payment in the example is raised to $40,000, the seller has$20,000 at risk and his effective return is 20%."The less the seller has at risk the greater his return. See supra note 55. If the underlying mortgage isamortized and if the land contract is not amortized, or if the land contract amortizes more slowly thanor at the same rate as the underlying mortgage, the seller's money in the transaction increases, i.e., heowes less and is owed the same, or not as much less than he owes. In that case, the effective interest ratewill drop over the term of the land contract. On the other hand, in the unlikely event that the underlyingmortgage is either unamortized or amortizes more slowly than the land contract, his effective rate willincrease. Finally, if they are both unamortized the effective rate remains constant.

"People-to-People Financing Encourages Fresh Starts and Brighter Outlooks, Real Estate Today, April1982, at 12, 13.

Winter, 1983]

First, most land contracts have interest rates far below the prevailing com-mercial interest rates. For example, the median interest rate for land contractsrecorded in 1981 in Montgomery County, Ohio (Dayton and its suburbs) was11 %,11 while commercial interest rates for the same period ranged up to 18%.

In addition, most commercial lenders charge "points, ' 60 which can beas much as 4% of the loan amount, 6' as a fee for originating a loan. Witha $100,000 sales price, and an $80,000 loan amount, it is fair to say that mostbuyers and sellers would negotiate for a $3,200 change in a $100,000 purchaseprice.

Finally, the lower cost of financing has two effects. The buyer's cost ofhousing is substantially reduced 6

1 thereby either making the purchase of a homeless burdensome or allowing the buyer to purchase a more expensive home.63

Also, many buyers may not be able to meet a bank's requirements for lendingbut may satisfy a seller's concerns because the seller may be more concernedabout selling the house than about how good the buyer's credit is. 64

C. Economics: Scholarly Perception and Ohio Reality

1. Scholarly Perception - The Land Contract as a Device of Last Resort

The land contract has generally been characterized as a financing deviceof last resort used by low-income and other purchasers who are unable to obtainconventional financing. Professor Mixon, in his study of land contract trans-actions in Houston, Texas, 65 took the position that many residential land con-tracts involve purchase of low-priced houses with little or no down paymentby marginally solvent vendees.6 Professor Mixon concluded from his data thatthe land contract and the forfeiture remedy well served the purposes of boththe vendor and vendee; the vendee was able to purchase a house that he couldnot finance commercially67 and the vendor was encouraged to sell the housebecause if the "risky" vendee defaulted the vendor would be able to both retainthe payments made by the vendee and get back unencumbered title to thehouse.68

"See infra text accompanying note 88 for origin of this interest rate.

"See supra note 53.

"0A "point" is usually a loan charge of I1o of the loan amount. Congress treats points as pre-paid interest.

I.R.C. § 461(g) (West 1978). The payment of points incurred in connection with the purchase of the taxpayers'principal residence is generally deductible in the year paid. Id.

"Dayton Area Mortgage Rates, Dayton Daily News, Dec. 27, 1981, at 9-E, col. 4.

"See infra chart in text accompanying note 90.

"The higher the monthly mortgage or land contract payment, the more the buyer needs to earn.

"'The seller may not require a specific income to payment ratio as a bank would, so the buyer might beable to take on a higher payment on a more expensive house.

"Mixon, supra note 33."Id. at 554-55.

"Id. at 555.6$Id ,

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Other commentators have also concluded that the land contract andforfeiture remedy have a "saving" function. 9 In the 1950's the Legal AspectsSubcommittee of the North Central Land Tenure Committee of the Farm Foun-dation, Chicago, Illinois, sponsored studies in several states on "How YoungFarmers Get Established in Farming." 70 The articles which resulted focusedprimarily on how farmers purchased land, which frequently was found to beby land contract.7 ' As did Professor Mixon later, some of these commentatorsconcluded that the land contract was necessary for marginal purchasers; theyliterally feared that but for the land contract and its forfeiture remedy, manyfarmers would be unable to purchase land."

This view is unrealistic. It seems fair to assume that one sells land becauseone either wants to or needs to. Certainly there must be some economic advan-tage to be gained by selling: the seller has purchased the land in order to resellit; he desires to sell land which is no longer useful to him and is therefore notworth the costs of ownership; he has obtained ownership involuntarily and eitherwants to avoid the costs of ownership or profit by realizing its value in money;or the land is still useful to him but he is unable to bear the costs of owner-ship. Regardless of the reason, the owner who offers his property for sale wantsto sell it and, if he can find a buyer, will do so no matter how the buyer isable to pay the purchase price. Land contracts are therefore neither legally noreconomically "necessary."

Two arguments have been made against the view that sales will occurregardless of the availability of land contracts. Both arguments can be over-come. The first argument is that if buyers are unable to obtain other financing,the only way the seller will sell his property is by financing the purchase himself,presumably through a land contract. However, a seller-offered mortgageprovides everything a land contract does except the remedy of forfeiture.I3 Thesecond argument is illustrated by Professor Mixon's example of the developerwho buys unimproved land by means of a conventional mortgage, intendingto subdivide it, build cheap houses on the lots, and sell the houses by landcontract to low-income persons."' Although, arguably, the developer wouldbe reluctant to go forward with the subdivision without being able to declarea forfeiture, it seems indisputable that since the developer is undertaking the

"See Clark, Installment Land Contracts in South Dakota, Part 1, 6 S.D.L. REV. 248 (1961); Clark &Richards, Installment Land Contracts in South Dakota, Part II, 7 S.D.L. REV. 44 (1962); Dolson, AComparison of Land Contracts and Other Security Devices in Kentucky, 32 U. CIN. L. REV. 435 (1963);Dolson & Zile, Buying Farms on Installment Land Contracts, 1960 Wis. L. REV. 383; Hines, Forfeitureof Installment Land Contracts, 12 U. KAN. L. REV. 475 (1964).

"See Beuscher, Buying Farms on Installment Land Contracts - A Preface, 1960 Wis. L. REV. 379.

'Clark, supra note 69, at 270; Dolson & Zile, supra note 69, at 386; Hines, supra note 69, at 477."1Clark, supra note 69, at 252; Hines, supra note 69, at 492.3See supra note 43.

"Mixon bases part of his analysis on the situations where a developer has a blanket mortgage on an entiresubdivision and then enters into land contracts on the individual lots. Mixon, supra note 33, at 546.

Winter, 1983]

subdivision for profit he too will find a way to realize his profit, with or without

forfeiture.

The economic reality, as will be illustrated in the next section of the article,

is even stronger than the theoretical counterarguments given above. In both

of these cases, the sole difference between using a seller-offered mortgage and

a land contract is the remedy of forfeiture.75 The matter then becomes a ques-

tion of policy. Should we allow sales of property where one of the bases of

the sales is the ability of the seller to declare a forfeiture of the buyer's interest?

The equity courts, at least in mortgage law,7 6 have answered a resounding "No!"

That answer may be too absolute, however, particularly if the inquiry is qualified

by adding "regardless of whether the buyer's interest is one worth protecting."

If we require an evaluation of the buyer's interest, the availability of the drastic

remedy of forfeiture is even more important in determining the equity and

ultimate utility of land contracts. The final answer must lie in determining what

interests are being protected and what interests should be protected.

2. Ohio Reality

The perception that land contracts will be most often used as a low-income

financing device is shattered when one considers the economics of the current

use of land contracts in Ohio. In order to test that perception the author under-

took a study of land contracts recorded in 1981 in Montgomery County, Ohio,

designed to determine when Ohio buyers and sellers were using land contracts."

At the outset, the myth that the land contract is a low-income financing

device is disproven by the study. The median purchase price for a house sold

by land contract in Dayton in 1981 was $46,000.78 In the inflated housing costs

of the 1980's, this may not seem very much, but, for example, it is not that

much below the median selling price for houses in Dayton in 1981 of $54,680.11

However, the study also showed a range of purchase prices from $3,000, clearly

low-income, to $500,000, clearly not low-income, 0 with 37% at $60,000 or

"See supra note 43.

"See supra text accompanying notes 31-39.

"The statistics contained infra in the text accompanying notes 74-89 are drawn from a study undertaken

by the author and his research assistant, Robin Ames. The study consisted of a review of approximately

10%1/ of the land contracts recorded in Montgomery County, Ohio, in 1981. Dayton is the principal city

in Montgomery County and the fourth largest city in Ohio. Montgomery County was chosen because Dayton

is a fairly average Ohio city, and the remainder of the county consists of urban, suburban and rual areas.

It was first determined that 2069 land contracts were recorded in Montgomery County in 1981 nand

that a 10% sampling would give a fairly accurate representation as to the terms of those contracts. Next

it was determined how many contracts were recorded in each month of 1981 and approximately 10% of

that number were chosen at random. The following four characteristics were determined as to each contract

examined: purchase price, down payment, stated interest rate, and lenght of time the contract would be

in effect if not prepaid. Each monthly sample was random. Once a land contract was chosen on an index,

which only identified it as a land contract and when it was recorded, that land contract was included in

the sample regardless of its terms. The raw data on the 200 land contracts studied is set forth in tabular

form as Appendix A at the end of this article.

"See supra note 77 and infra Appendix A.

"DAYTON AREA BOARD OF REALTORS, 1981 COMPOSITE COMPARABLE SALES INDEX BOOK (1982).

"Appendix A, index numbers 651 D06 and 270 C09, respectively.



higher, 15.5% at $80,000 or higher, and 8.5% at $100,000 or higher."

The study showed, in addition, that labeling Ohio land contracts "long-term" is a misnomer. The median term for the land contracts studied was amere three and one-half years, 2 hardly long-term when compared to thestandard commercial mortgage term of thirty years. 3 Even more striking wasthat only 15.5% had terms of over five years, only 9% had terms of over tenyears, and a mere 3% had terms of thirty years. 4

The median down payment made on the land contracts studied was alsointeresting. For all the contracts studied the median down payment was about14% of the purchase price.8 5 No matter how it is broken down, the mediandown payment stayed below 20%. For instance, if one isolates down paymentaccording to term, those with terms above the three and one-half year medianterm have a median down payment of 15%, while those with terms below themedian term have a median down payment of 16%, and those with no statedterms have a median down payment of 12%.86 There is some difference if oneisolates down payment by purchase price, but the median down payments are stillless than 20%; those with purchase prices above the $46,000 median purchaseprice have a median down payment of 18%, while those with purchase pricesbelow the $46,000 median purchase price have a median down payment of 12%.87

One additional factor, interest rate, needs to be added to complete thepicture. The median stated interest rate of the land contracts studied is 110.88This is far below the commercial mortgage rate prevailing in the Dayton marketin 1981 of 15.5% to 18%.9

The best way to understand the importance of owner-financing, especiallythe land contract, in the market is to look at a concrete example. Take the"median" house, $46,000, and consider how the transaction looked to the 1981home buyer in two situations: if he borrowed from a bank or if the seller andhe entered into a land contract.

'Appendix A.

"Appendix A. For purposes of establishing a median term the 37 land contracts which did not state termswere excluded. If one includes those 37 by assigning them terms of zero years, the median term is three years."In the last several decades mortgage terms have increased from 15 or 20 years to 30 years or longer,with the 30 year mortgage firmly in place for at least the last 30 years."Appendix A. No land contract studied had a term of over 30 years, the typical length for commercialfirst mortgages.

"Appendix A.

"Appendix A. See supra note 82 for a dicsussion of how land contracts with no stated term were treatedin establishing the three and one-half year median term for the land contracts studied.

"Appendix A.

"Appendix A.

"See supra note 53.

Winter, 1983]

Comparison of Bank Mortgage to Amortized and Interest-Only

Land Contracts9"

Bank Financed Land Contract Land Contract(30 year (30 year amortized, (Interest only,

amortized) 3.5 year balloon) 3.5 year balloon)

Purchase Price $46,000 $46,000 $46,000

Down Payment $ 9,200 (20%) $ 6,440 (14%) $ 6,440 (14%)

Balance $36,800 $39,560 $39,560

Interest Rate 16%'o 11%°o 11%

Monthly Payment $524.73 $376.73 $362.63

There was a tremendous economic incentive for the buyer to prefer a land

contract, for he would dramatically reduce his monthly cost of housing and

avoid the high initial costs of obtaining a commercial loan, avoiding points,

loan fees,91 and, if he desired, a title insurance premium or the cost of a title

abstract. However, the "median" land contract buyer was taking one substantial

risk in that within three and one-half years he would have to pay off the land

contract in full with his own funds, convince the seller to extend the land con-

tract, obtain commercial financing, sell the house, or be faced with defaulting.

No matter what reason a vendee may give for taking such a risk, 92 it is a substan-

tial one, 93 regardless of a vendor's remedy. The vendee's default is serious in

any case, but forfeiture can make it catastrophic.

If we assume that default is a possibility, consider where the "median"

vendee placed himself. At the end of the three and one-half year term, he will

still not have paid 20% of the purchase price, even with a thirty-year amortized

land contract with a three and one-half year balloon.9" The "median" Ohio

vendee is therefore beyond the reach of mandatory foreclosure, and the vendor

is given the option of seeking forfeiture and damages. 95

The study shows that the situations of most current Ohio land contract

vendees, at all income ranges, fall outside of the requirements for mandatory

foreclosure of land contracts contained in the Act. With land contracts being

"All figures for the land contracts are derived from medians in the study. The commercial interest rate

is a "best guess" average for 1981. Monthly payments are derived from standard amortization charts.

"See supra note 60.

"The reasons a vendee might give include planning to move and sell or refinance commercially when interest

rates drop.

"Rotbart & Yas, Record Level of Home Foreclosures is Bringing Grief to Many Families, Wall St. J.,

June 15, 1982, at 23, col. 3.

"He will have paid 15.6% or $7,159, the original $6,440 down payment plus $719 in principal, in the

42 monthly payments he will have made.

"See OHIO REV. CODE ANN. § 5313.08 (Page 1981), and supra text accompanying notes 3-6.



used as bridges of finite length over a period of high interest rates of poten-tially infinite duration, it seems safe to predict that some vendees may see their"bridges" collapse and be unable to deal financially with the consequences.9"Further, the interests of these vendees may be substantial, for example, those1981 vendees who paid between $46,000 and $500,000 and whose median downpayment was 8IN. 97 These are clearly interests worth protecting, and Ohioland contract law appears on its face to leave them unprotected.

III. COMMON LAW AND MODERN TRENDS

Ohio is not the only jurisdiction to give less than full protection to landcontract vendees. Forfeiture is neither a new nor a solely statutory remedy.The purpose of this section is to survey the origins of the forfeiture conceptand the approaches currently being taken by states other than Ohio beforelooking more thoroughly at Ohio law.

A. Common Law

Trying to determine what is the "common law" of forfeiture is a difficulttask because the concept of forfeiture lacks easily identifiable roots in thecommon law and contradicts most legal and equitable concepts of both con-tract and property law. 8 It is difficult to dismiss forfeiture as merely an aber-ration of the common law because it has persisted for two centuries and, atleast as a point of departure for courts, it is still alive and well in many states.99

Further, it is hard to call a concept an abberation when it has engenderednumerous law review articles, notes and comments, and chapters in treatises.' °0

The origin of allowing forfeiture of land contracts is unclear. Althoughtwentieth century commentators uniformly decry forfeiture,'"' earlier courtsclearly took a contrary view in initially allowing forfeiture. One commentatorlays the blame on the English courts and the policy determination by Lord Eldonthat "time might be made the essence of a contract."'0 2 To this apparent preclu-sion of equitable considerations, the commentator contends, opportunistic ven-dors coupled acceleration, which resulted in vendees' having their real property

"See Rotbart and Yas, supra note 93."See Appendix A, and supra text accompanying note 87."These concepts include, for example, the maxim "equity abhors a forfeiture," and the idea that damagesprovided at the inception of a contract, so-called liquidated damages, be reasonably calculated to reflectthe damage a party will suffer upon breach."Nelson & Whitman, supra note 22, at 544."'In addition to the previously cited article by Professors Nelson and Whitman, supra note 22, at least

36 articles, notes and comments have been published since 1921 which deal in detail with forfeiture. Inaddition, several of the dominant minds in contract law turned their attention to land contract forfeituresin their treatises. See, e.g., 5 A. CORBIN, CORBIN ON CONTRACTS §§ 1075, 1098-1098A (1964); 5 S.WILLISTON. A TREATISE ON THE LAW OF CONTRACTS §§ 791-792 (3d ed. 1961).r0'5 A. CORBIN, supra note 100, § 1098A, at 537; 5 S. WILLISTON, supra note 100, § 792, at 776.

"'Levin, Maryland Rule on Forfeiture Under Land Installment Contracts. . . A Suggested Reform, 9MD. L. REV. 99, 108 (1948).

Winter, 1983]

interests and credit for payments made taken from them by their failure to

make payments in a timely manner.1"3 The result is forfeiture.

Perhaps the clearest explanation that can be made for this rather shock-

ing decision of the equity courts to literally construe contract terms allowing

forfeiture, thereby greatly benefiting one party to the severe detriment of

another, was offered by Professor Simpson in his article on equitable

conversion:°

The doctrine that equity will enforce forteiture provisions in land con-

tracts where time is expressly made of the essence developed in this coun-

try during the latter half of the nineteenth century, 05 at a time when ex-

treme ideas as to "freedom of contract" were influencing American judicial

decisions in every field.30 6 It was a time when equity was decadent, 0 7 when

laissez faire was almost an article of judicial faith,30 8 and when the courts

were thinking in terms of free-willing individuals entirely able to look after

themselves rather than in terms either of classical equity or of a socialized

law taking a realistic account of inequalities of economic position and

bargaining power. The ecclesiastical chancellor who granted relief to a

plaintiff who had not taken care to follow the prescribed rules as to cove-

nants because "Deus est procurator fatuorum,''309 ["God takes care of

fools"] the classical chancellor who created the equity of redemption in

the face of the strict law310 and who said that "necessitous men are not

... free men,'' 311 had given place to judges who regarded individual

freedom of contract as fundamental in any civilized system of law and

enforced the harshest of contract provisions without hesitation or searching

of conscience unless constrained by binding precedent to relieve against

them. The court of conscience had become a court strictissimi juris1 2 ["Of

the strictest law"]. In such an atmosphere, it was easy enough to put aside

the tradition that equity would not enforce a forteiture except insofar as

1031d.

'o'Simpson, Legislative Changes in the Law of Equitable Conversion by Contract: II, 44 YALE L.J. 754,

776-77 (1935). The footnotes are numbered as in the original text. The Latin translations were added by

this author. Following are the footnotes from the original text:

I 'Compare Heckard v. Sayre, 34 111. 142 (1864) with Edgerton v. Peckham, 11 Paige 352 (N.Y. 1844)

'6See Pound, Liberty of Contract (1909) 18 YALE L.J. 454. Cf. Jennings, Freedom of Contract-

Inquiries and Speculations (1934) 22 CALIF L. REV. 636.

"°'See Pound, The Decadence of Equity (1905) 5 COL. L. REV. 20.

"See note 306, supra. Cf. Homes, J., dissenting, in Lochner v. New York, 198 U.S. 45, 75 (1905).

"George Neville, Bishop of Exeter, L.C., in Y.B. Pasch, 8 EDW. IV, f., pl. 11 (1467); see

Vinogradoff, Reason and Conscience in Sixteenth-Century Jurisprudence (1908) 24 L.Q. REV. 373,

380.

"'°See 5 HODSWORTH. op. cit. supra note 298, at 330.

"Lord Northington, L.C., in Vernon v. Bethell, 2 Eden 110, 113 (Ch. 1762).

112Cp. Buckley, J., in In re Telescriptor Syndicate, Ltd., [1903] 2 Ch. 174; 195: "This Court is

not a court of conscience." For a very recent example of this tendency, see Graf v. Hope Bldg.

Corp., 254 N.Y. 1, 171 N.E. 884 (1930); and cf. the comment on that case in (1930) 79 U. OF PA.

L. REV. 229, 231.



that tradition had been embalmed in direct precedents, and to developa line of decisions holding that contracts for the sale of land which ex-pressly made time of the essence and provided for the forteiture of allpayments theretofore made in the event of default would be enforcedaccording to their literal terms," ' especially where prompt payment ofall installments was made an express "condition precedent" to thepurchaser's rights under the contract.

Although Professor Simpson was primarily concerned with the conceptthat some incident of title is equitably converted to a land contract vendee,his thoughts still include an eloquent explanation and damnation of the forfeitureremedy. Simpson's answer to the problem of forfeiture was quite simple; hebelieved the only remedy was legislation because the equity courts had failedto do their job.' 5

One can lay blame for enforcement of land contract forfeitures on thecourts, as most commentators have, 10 6 but the scholars cannot escape all blame;it was the scholars who furthered the doctrine of freedom of contract whichwas the theoretical basis for allowing the forfeiture remedy.I 7 The courts maybe blamed for failing to use equitable considerations in determining whetherto grant forfeiture and rigidly adhering to strict forfeiture. Even if a court deniedthe vendee any further interest under the defaulted-upon land contract by allow-ing forfeiture, it was not precluded from using a quasi-contract concept, suchas quantum meruit, to give relief to the vendee if the vendor had gained anunfair position through forfeiture.' 08 Unfortunately, however, the majority ofearly courts denied the vendee any relief.' 9

An even more objectionable attitude of some courts toward defaultingvendees was that a vendee in default solely because of his failure to pay wasentitled to nothing."l 0 The greatest abuse in applying forfeiture in this knee-jerk manner was that many courts granted forfeiture upon any default by avendee whether or not there was a forfeiture clause in the land contract. "' This

carries freedom of contract so far that it psychologically strips the equity courtof its equitable power.

3 'Some of these decisions have resulted in shocking hardship on the purchaser. See, e.g., IowaRr. Land Co. v. Mickel, 41 Iowa 402 (1875); Heckard v. Sayre, 34 111. 142 (1864); Nelson Real

Estate Agency v. Seeman, 147 Minn. 354, 180 N.W. 227 (1920); Brown v. Ulrich, 48 Neb. 409,67 N.W. 168 (1896); Doctorman v. Schroeder, 92 N.J. Eq. 676, 114 At. 810 (1921).

"'Simpson, supra note 104, at 777.

"'E.g., OSBORNE,supra note 33, § 3.26; S. WILLISTON,Supra note 100, § 791; Ballantine, Forfeiture forBreach of Contract, 5 MiNN. L. REV. 329, 345 (1921); Levin, supra note 102, at 108; Vanneman, StrictForeclosure on Land Contracts, 14 MINN. L. REV. 342, 345-46 (1930).

'°'Simpson, supra note 104, at 776.

'"Bodenheimer, Forfeiture Under Real Estate Installment Contracts in Utah, 3 UTAH L. REV. 30, 32 (1952).

1I9d.

"Old. at 33.

111d_

Winter, 19831

No matter what theoretical basis is used, forfeiture became the black letterlaw of land contract defaults during the nineteenth century. Perhaps becauseof the scholarly objection to forfeiture, or its glaring inequity, the black letterlaw was quickly eroded by exceptions.

B. Modern Trends

In evaluating the current law on land contract defaults, the concept offorfeiture "at best serves as a point of departure."" 2 There is no way to pointto any consistent trend among the states. ",3 "Not only does the law vary fromjurisdiction to jurisdiction, but within any one state results may vary dependingupon the type of action brought, the exact terms of the land contract, and thefacts of the particular case." 1 4 The trend is away from strict forfeiture, however.The states can be divided into three categories based on their treatment offorfeiture: 1. statutory forfeiture with clear requirements for notice and a periodfor reinstatement by the vendee; 2. statutory abolition of forfeiture, either ex-press or judicially implied, and treatment of land contracts as mortgages; and3. equitable judicial action allowing the remedies of reinstatement, vendee'srecovery of damages, vendee's redemption, or requiring foreclosure as if amortgage in appropriate cases." 5

1. Statutory Forfeiture

One legislative response to the inequity of strict forfeiture is to regulateforfeiture, thereby making the vendor give effective notice to the vendee andgiving the vendee the ability to cure a default and reinstate the contract." 1 6 Pro-fessors Nelson and Whitman suggest that the Iowa statute is "the best exampleof this type of legislation.'"II

Section 656.1 of the Code of Iowa prohibits land contract forfeitures unlessthere has been compliance with the statutory procedure for notice of the rightof reinstatement."' 8 Section 656.2 of the Code of Iowa provides, in relevantpart: I I I

Such forfeiture and cancellation shall be initiated by the vendor ... byserving . . . on the vendee . . . a written notice which shall:

1. Reasonably identify said contract, and accurately describe the real

"'Nelson & Whitman, supra note 22, at 543.1 31d.

"'Power, Land Contracts as Security Devices, 12 WAYNE L. REV. 391, 416 (1966) (footnotes omitted).

'Ohio has chosen to follow none of the three courses completely. By allowing forfeiture after only a10 day period for reinstatement, and without redemption or vendee recovery of damages, for some landcontracts and treating others as mortgages, Ohio has chosen both one of the more restrictive and one ofthe most liberal views possible, depending on the economics of the transaction. See OHIO REV. CODE ANN.§ 5313.07 (Page 1981).

"'Nelson & Whitman, supra note 22, at 544.

"'ld."'IOWA CODE ANN. § 656.1 (West 1950).

.'.IOWA CODE ANN. § 656.2 (West 1950 and Supp. 1981-82).



estate covered thereby.2. Specify the terms and conditions of said contract which have not been

complied with.3. Notify said party that said contract will stand forfeited and canceled

unless said party within thirty days . . .performs the terms andconditions in default, and, in addition, pays the reasonable costs ofserving the notice.

Several other states have similar statutes in which the reinstatement period varies,with the longest being one year in North Dakota. I0 For example, Ohio appearsto have one of the shortest periods for reinstatement; the right of the vendeeto reinstate is absolute for thirty days after a default, but thirty days after thatdefault occurs the vendor may send a notice to the vendee which limits thefurther right to reinstate to ten more days."'

The statutory reinstatement period obviously lessens the harshness of strictforfeiture; rather than having the draconian result of "miss a payment, outyou go," the vendee is given at least some time to pay what is due and regaingood standing to continue with the land contract. On the negative side, Pro-fessors Nelson and Whitman contend that courts have allowed statutes to for-malize the forfeiture concept with many courts in states with statutory forfeitureappearing constrained from using their equitable powers to lessen the harshnessof a better, but still drastic, requirement of "pay up after notice or else."' 12 2

Interestingly, however, the Supreme Court of Iowa has recently stated thatalthough it will usually enforce forfeiture when the vendor strictly complieswith the statute, equitable considerations are still appropriate. In Jensen v.Schreck, 12 3 a case involving a joint venture in which real estate was purchasedby land contract, the court, in deciding the case, considered as a factor theamount paid on the contract by the vendee. 12 Although the defendants in theforfeiture action, the Schrecks, made a $1,000 down payment on a $56,000purchase price and had made $1,914.79 in improvements, the court allowedforfeiture by analogizing the amount retained to liquidated damages and decidingthat the amount of "liquidated damages" was reasonable. 5 Although the courtdid grant forfeiture, the court showed that it recognized its obligation to "doequity" even in the face of a "mandatory" statute.

Another interesting point raised by Professors Nelson and Whitman is that

"'Nelson & Whitman, supra note 22, at 544. Note 8 on p. 544 lists three statutes: MINN. STATE. ANN.

§ 559.21 (West Supp. 1977) (amended 1980, now in West Supp. 1982), N.D. CENT. CODE §§ 32-18-01 to-06 (1976), and S.D. COMp. LAWS ANN. § 21-50-01 to -07 (1967).

"'OHIO REV. CODE ANN. §§ 5313.05-06 (Page 1981).

"'Nelson & Whitman, supra note 22, at 545.3275 N.W.2d 374 (Iowa 1979).

"'Id. at 386-87.

"'Id. at 387. The liquidated damages rationale is clearly fallacious, however, as there has been no effortto approximate the vendor's actual damages. See 5 S. WILLISTON, supra note 100; Simpson, supra note104, at 775.

Winter, 1983]

AKRON LAW REVIEW

these statutory schemes closely resemble strict foreclosure in that the vendeein default is, like the mortgagor in default, given one last chance to save hisinterest in the property. 1

2 6 The difference between the two is that the mortgagorhas a right of redemption exercisable by paying the entire outstanding balanceon the mortgage, thereby discharging it, where the land contract vendee underthese statutes merely has to pay all sums previously not paid and is then ableto continue paying future installments on the land contract as they come due.'27

The ability to reinstate appears to give the land contract vendee an advantagethe mortgagor does not have until one considers that strict foreclosure is rarelyallowed; almost all foreclosures are by sale,' 2 s public or private. Therefore themore accurate comparison is between the mortgagee who has a right to a neutralsale of the property and the land contract vendee who loses the property alongwith his payments and improvements.

2. Abolition of Forfeiture

Forfeiture has been abolished in several states, both directly and indirectly.The most direct statute abolishing forfeiture appears to be Oklahoma's:

All contracts for deed for purchase and sale of real property madefor the purpose or with the intention of receiving the payment of moneyand made for the purpose of establishing an immediate and continuingright of possession of the described real property, whether such instrumentsbe from the debtor to the creditor or from the debtor to some third per-son in trust for the creditor, shall to that extent be deemed and heldmortgages, and shall be subject to the same rules of foreclosure and tothe same regulation, restraints and forms as are prescribed in relation tomortgages .. .129

The statute is even more striking because foreclosure in Oklahoma may onlybe accomplished by judicial action.' 30 Maryland takes the same position asOklahoma in the sale of residential property by land contract to a noncorporatevendee.' ' In all other cases, common law forfeiture presumably is availablein Maryland.' 32

Kentucky and Indiana'33 have taken direct judicial approaches. In Sebastianv. Floyd, ' the Supreme Court of Kentucky ruled that foreclosure of a landcontract as if it were a mortgage is a vendor's only remedy upon default bythe vendee. While being careful to distinguish the long-term installment con-

" 6Nelson & Whitman, supra note 22, at 545.127Id.

128OSBORNE, supra note 33, § 1.4.'29OKLA. STATE. ANN. tit. 16 § I1A (West Supp. 1981-82).

"OKLA. STATE. ANN. tit. 12, § 686 (West 1960).

"'MD. REAL PROP. CODE ANN. §§ 10-101 to -108 (1981).

"Nelsor & Whitman, supra note 22, at 546.

"'Sebastian v. Floyd, 585 S.W.2d 381 (Ky. 1979); Skendzel v. Marshall, 261 Ind. 226, 301 N.E.2d 641 (1973).

-"585 S.W.2d 381, 384 (Ky. 1979).

[Vol. 16:3


tract before it from an "executory deposit receipt agreement,"' 35 the court stated:There is no practical distinction between the land sale contract and a pur-chase money mortgage, in which the seller conveys legal title to the buyerbut retains a lien on the property to secure payment. The significant featureof each device is the seller's financing the buyer's purchase of the pro-perty, using the property as collateral for the loan ...

The modern trend is for courts to treat land sales contracts asanalogous to conventional mortgages, thus requiring a seller to seek ajudicial sale of the property upon the buyer's default.' 36

Sebastian is now clearly the rule of law in Kentucky.'

California, in the inimitable way it has in real estate finance matters,' 38

has taken a statute that appears to allow forfeiture in some cases and inter-preted it as prohibiting forfeiture. I" Section 3275 of the California Civil Codeprovides as follows:

Whenever, by the terms of an obligation, a party thereto incurs aforfeiture, or a loss in the nature of a forfeiture, by reason of his failureto comply with its provisions, he may be relieved therefrom, upon makingfull compensation to the other party, except in the case of a grosslynegligent, willful, or fraudulent breach of duty.' °

Despite section 3275, the California courts routinely allowed forfeiture of landcontracts until 1949 when the California Supreme Court decided Barkis v.Scott. '41 In Barkis, a case involving sale of a house, the court concluded thatat most the vendee's default was the result of simple negligence, rather thangross negligence, fraud, or willfull act, and the vendee was therefore entitledto avoid forfeiture.' 4 2

Even when confronted with the "wilfull, but repentant vendee" inMacFadden v. Walker, 141 the California Supreme Court still refused to allowforfeiture. The vendee, an older woman, had been in default for over two yearsbut was willing to pay the balance of the purchase price after her vendor soughtforfeiture. By tying section 3275 to several other Civil Code sections involving

"'Id. at 383.3Jld.

"'See Gamble v. Bryant, 599 S.W.2d 472 (Ky. Ct. App. 1980)."'See generally Honey v. Henry's Franchise Leasing Corp., 64 Cal. 2d 801, 415 P.2d 833, 52 Cal. Rptr.18, (1966); Wellenkamp v. Bank of America, 21 Cal. 3d 943, 582 P.2d 970, 148 Cal. Rptr. 379 (1978).'"Hetland, The California Land Contract, 48 CAL. L. REV. 729, 733 (1960); Nelson & Whitman, supranote 22, at 553."'CAL. CIv. CODE § 3275 (West 1970).'34 Cal. 2d 116, 208 P.2d 367 (1949). See also Hetland, supra note 139, at 732; Nelson & Whitman,

supra note 22, at 553."34 Cal. 2d at 123, 208 P.2d at 372.

"5 Cal. 3d 809, 815, 488 P.2d 1353, 1356, 97 Cal. Rptr. 537, 540 (1971).

Winter, 19831

punitive damages,'" liquidated damages,1 4 5 and prohibition of specific perfor-mance of a forfeiture,1 4 6 the court concluded that the only fair result was to

grant specific performance to the then willing vendee.' 4 7 In so holding, the court

rejected Profesor Hetland's strong plea for mandatory foreclosure' 4 8 and left

the question of how it would treat forfeiture, if granted, to its prior jumble

of holdings, including its rather oblique reference in Honey v. Henry's Franchise

Leasing Corp. 9 to foreclosure at the choice of either the vendor or the vendee.

California appears to have the most elaborately developed law on the rights

of land contract vendees and vendors. 5o Forfeiture can be avoided by a vendee

by either paying the amount in default or requesting foreclosure.'

3. Equitable Judicial Action

Professors Nelson and Whitman suggest four ways in which courts have

acted to avoid or mitigate the harshness of forfeiture: 1) waiver by the vendor;

2) redemption by the vendee; 3) restitution; and 4) foreclosure.'5 2 These four

concepts are obviously not exclusive, and they overlap with the two previously

discussed topics, statutory forfeiture and abolition of forfeiture. For example,

Iowa, a statutory forfeiture state, has indicated a willingness to allow equitable

relief from statutory forfeiture.' 53 On the other hand, the Kentucky Supreme

Court has abolished forfeiture and imposed foreclosure in all cases without

any statutory basis.' 54 In both Iowa and Kentucky, then, the point of departure

is not common law forfeiture. The difference is that the courts which start with

common law forfeiture and take a case by case approach may choose to allow

forfeiture, or to deny it because the forfeiture clause is unreasonable or the

situation is such that it would be unfair to allow forfeiture.' 5

a.. Waiver

Waiver is perhaps the easiest for a court to find. Few vendors have not

accepted at least one, and perhaps many, payments after they were due.' 56

Ultimately the vendor tires of the late payments and declares the land contract

"CAL. CIv. CODE § 3294 (West 1970) (current version at CAL. CIV. CODE § 3294 (West Supp. 1982)).

"'CAL. CIv. CODE §§ 1670-1671 (West 1973) (current version at CAL. CIv. CODE § 1671(b), (d) (West Supp.

1982))."6CAL. CIV. CODE § 3369 (West 1970) (current version at CAL. CIV CODE § 3369 (West Supp. 1982)).

"5 Cal. 3d at 815, 488 P.2d at 1357, 97 Cal. Rptr. at 541."Id. at 816, 488 P.2d at 1357, 97 Cal. Rptr. at 541 (citing J. HETLAND, CAL. REAL ESTATE SECURED

TRANSACTIONS §§ 3.58-.81 (1970)).

'"64 Cal. 2d 801, 805, 415 P.2d 833, 835, 52 Cal. Rptr. 18, 20 (1966). See also Ward v. Union Bond

& Trust Co., 243 F.2d 476 (9th Cir. 1957).

" Nelson & Whitman, supra note 22, at 559.

"'OSBORNE. supra note 33, § 328, at 95.

" Nelson & Whitman, supra note 22, at 547-62.

"'See supra text accompanying notes 123-25.1"See supra text accompanaying notes 133-37.


"'Id. at 548.



forfeited. In response to the vendor's suit, or in the vendee's suit for specificperformance, the vendee may ask for either reinstatement or specificperformance, ' arguing that the vendor has waived his right to forfeiture bynot requiring strict compliance with the land contract.

As might be expected when courts apply equitable principles on a caseby case basis, cases involving waiver are difficult to reconcile.,58 Two judgesgiven the same facts will, inevitably, come to different conclusions at least someof the time. Given the wide range of views concerning forfeiture,'59 which in-creases the likelihood of disagreement, there will be inconsistencies. "In somecases rather innocuous forebearances by vendors have been translated intofavorable holdings for purchasers, while in others quite substantial leniencyhas been unavailing." 6 0

Professors Nelson and Whitman' 6' refer to an interesting Utah case, PacificDev. Co. v. Stewart, 162 as an example. During the first two years of a landcontract the vendee missed some payments and made others after they weredue. The vendor demanded that payments on the contract be made currentbut also said no forefeiture was then being considered. In the vendor's suitfor forfeiture the trial court said that strict performance of the contract hadbeen waived. The Utah Supreme Court, however, granted forfeiture becausethe vendees had had ample time to bring payments current and "[Tihey hadnot paid the equivalent of the rental value of the property for the time theyoccupied it.' ' 3 In effect, although there had been waiver, the vendees hadnot acted to help themselves. As Professors Nelson and Whitman so charitablyput it, "The court may have been confusing the waiver concept with the prin-ciple of equitable relief from forfeiture." 6

b. Redemption and Restitution

Redemption by and restitution to the vendee are truly equitable remedies.With these remedies the courts are directly considering the fairness of forfeiture,while with the concept of waiver they are considering the actions or inactionsof the parties apart from the ultimate fairness of forfeiture.

We have already seen the California courts allow redemption in Barkis

"'Id. In using the term "specific performance," one could just as easily use "redemption"; after all,what the vendee wants to do is tender the full contract price in exchange for a deed from the vendor.As Professors Nelson and Whitman correctly point out, however, since the claim for redemption is basedon waiver, it is clearly different from the situation where the court offers the vendee a redemption periodafter granting the vendor's forfeiture action. Id. at 550.

"'Id. at 549.

" See supra text accompanying notes 104-1I; 133-51.""Nelson & Whitman, supra note 22, at 549.

,6,Id.'61113 Utah 403, 195 P.2d 748 (1948).

"'Id. at 409, 195 P.2d at 751.

'"Nelson & Whitman, supra note 22, at 550 n.28.

Winter, 1983]

v. Scott' 65 and McFadden v. Walker. 66 Although those cases were obstensibly

based on a statute,1 67 one could just as easily base the same conclusions on

the legal maxim "equity abhors a forfeiture." It seems logical that, almost

regardless of the prior activity of the vendee, if the vendee is now willing to

pay to the vendor the balance due on the land contract a court should let him.

After all, assuming the vendor has not been damaged in a way which cannot

be compensated for monetarily, if the vendee is allowed to pay the parties

will each get what they should want; the vendor gets all his money and the

vendee gets the property.' 68

Restitution is in a somewhat different position as a remedy in that the

vendee sues the vendor. Waiver, redemption, and foreclosure are all logically

grouped. Waiver is not inconsistent with forfeiture as it is a contract principleand forfeiture is arguably a freedom of contract concept. 69 Redemption is very

close because it literally puts the parties where they had decided they wantedto be. '70 Foreclosure puts control in the vendor, the wronged party, for collec-

tion of his money. "' Restitution does not logically fit, as the vendee is able

to obtain damages from the vendor and the parties are not put where they

bargained to be. However, some courts that do not allow redemption or

foreclosure are allowing resitution suits by vendees.'"

The problem in restitution suits is how to determine what the vendee's

damages are. The courts have suggested several different factors that might

affect how much, if any, is awarded to the vendee: the fair rental value of

the premises, 7 3 the amount paid to the vendor,' 74 and the change in value ofthe premises between the inception of the contract and default. 75 ProfessorsNelson and Whitman also quite correctly suggest that the time value of moneyshould affect the amount of damages; however, apparently no court has adoptedtheir position.' 76

Several states, most notably Utah and Florida, have been concerned with

determining "unconscionability" before allowing restitution to the vendee.7

"'See supra text accompanying notes 141-44.

'"See supra text accompanying notes 143-49.

"'CAL. CIv. CODE § 3275 (West 1970). See supra text accompanying notes 138-42.

"'This view obviously rejects the freedom of contract position and looks at the parties independently.

After all, what the vendor should want is his money, and if he gets that plus interest and costs of collection,

why should the vendee be punished?



"'This is an obvious contractual inconsistency because it denies the vendor the right to gain possession

of the property for his own use unless he buys it at the foreclosure sale.


"'Id. at 555."'Ild.

"'Id. at 557."7Id. at 557, n.61.

"'See, e.g., Strand v. Mayne, 14 Utah 2d 355, 384 P.2d 396 (1963); Sawyer v. Marco Island Dev. Corp.,



This appears to be irrational, both because requiring unconscionability meansthat some aspect other than the vendee's damages must be unconscionable forthe vendee to collect damages and because the presence of damages means thatforfeiture is unconscionable. The first is irrational because the vendee's damagesare frequently going to be independent of other terms; in fact, the contractand forfeiture of it may be completely fair in that no equities favor the vendee'sclaim to the property, but for the vendee's damages. The second is tautological.

Although California courts do not consider unconscionability, they havetaken the awarding of vendees' damages to a fine art.'18 In Honey v. Henry'sFranchise Leasing Corp., 7 the California Supreme Court held that the ven-dor could choose between two measures of the vendee's damages: 1) the ex-cess of the vendee's payments on the contract over the fair rental value of thepremises during the time the vendee is in possession; or 2) the excess of thevendee's payments on the contract over the difference between the contractprice and the value of the premises upon default (assuming a drop in value). "0

The court let the vendor choose because to let the vendee choose would beto convert the land contract into a lease option, something a defaulter should'not have the option to do.'"' Either way, the vendee cannot lose because ifthe property has appreciated in value he can sell it and pay off the vendor,'8 2

and if he cannot sell the property, he may be able to force a foreclosure nomatter what the vendor desires.8 3

Although there is no consistent direction being taken by other states, onecomment can be made with certainty: courts are reluctant to enforce forfeituresrigidly. This background should provide a sufficient setting for consideringOhio's approach to forfeiture and the policies favoring and opposing forfeiture.

IV. OHIO RESIDENTIAL LAND CONTRACT LAW

At the outset it is important to note that Ohio's statutory regulation ofland contracts covers only Ohio real property "improved by virtue of a dwell-ing having been erected on the real property."'" In addition, from 1969-1980the statute had the following limiting phrase at the end of it: "where the pur-chase price does not exceed thirty thousand dollars."'I This affected not only

301 So. 2d 820 (Fla. App. 1974), cert. denied, 312 So. 2d 757 (Fla. 1975). See also Nelson & Whitman,supra note 22, at 555-56.1'It is, however, clearly flawed fine art.'764 Cal. 2d 801, 415 P.2d 833, 52 Cal. Rptr. 18 (1966).

"'Id. at 803, 415 P.2d at 834-35, 52 Cal. Rptr. at 19. Professors Nelson and Whitman argue persuasivelythat the court incorrectly ignores the true value of money in its calculations. Nelson & Whitman, supranote 22, at 557, n.61.

"64 Cal. 2d at 804, 415 P.2d at 835, 52 Cal. Rptr. at 20.

'See supra text accompanying notes 138-50."64 Cal. 2d at 805, 415 P.2d at 835, 52 Cal. Rptr. at 20.

1'OHlO REV. CODEANN. § 5313.01(B) (Page 1981). Suffice it to say that no Ohio case has dealt with thisvaguely worded statute. The author assumes that this language was intended to refer to a single-familyresidence.

"1'1969 OHIo LAWS 424, 424-30 (effective Nov. 25, 1969) (current version at OHIo REV. CODE ANN. §5313.01(B) (Page 1981)).

Winter, 1983]

remedies but the entire land contract statutory scheme.'" 6 By a 1980 amend-ment to the statute which removed the $30,000 limitation,'87 however, Ohioland contracts have been neatly divided; the statute governs all land contractsinvolving property with a dwelling on it and all other land contracts are governedby case law.

A. Pre-1969 Residential and Current Non-Residential Land Contract Law

It is probably fair to say that Ohio's general land contract law looks agood deal like that of other states which do not have statutes; the courtsacknowledge forfeiture as a possibility but only rarely strictly enforce forfeiture.This was not always the case.

The courts in several early Ohio cases granted forfeiture to the vendors. 88

In Rummington v. Kelley'8 9 and Scott v. Fields,'90 two of the earliest OhioSupreme Court cases on the question, the default of the vendee in each casewas unexplained, but after forfeiture was declared each vendee offered to paythe vendor the full amount due under the contract.' 9 ' Even though the courtallowed forfeiture in both cases, the decisions were not as strict as first appearsbecause in each case the vendee was in clear default for a lengthy period oftime and either had no equity or the vendor had offered to return at least partof the amount paid by the vendee.

In Scott, the vendee was obligated to make a total of four payments, onJanuary 13, March 13, and June 13, 1835, and on January 13, 1836. The firstand second payments were timely made, but the vendee did not offer to makethe third payment until July 29, 1835, 45 days late. Since the vendor had soldthe property to another on July 21, 1835, he declined the offered payment and,on both July 29 and August 1, 1835, he offered to return the second paymentto the vendee. The vendee declined, and on the date of the final payment,January 13, 1836, he tendered the third and fourth payments along with interest,which the vendor refused.

The court emphasized the contract aspects of the land contract in rejectingthe vendee's request for specific performance: "How, then, can it be said thatthe complainant is entitled to a specific performance when he has been guiltyof a violation of his contract - a contract drawn with the most guarded preci-sion and care, and intended to impose terms upon respondent as well as uponhimself?" 92 Despite this seemingly strict approach to forfeiture, it is impossi-

116OHIO REV. CODE ANN. § 5313.01 is the definitional section for Chapter 5313.


"'See, e.g., Campbell v. Hicks, 19 Ohio St. 433 (1869); Kirby v. Harrison, 2 Ohio St. 327 (1853);Rummington v. Kelley, 7 Ohio 97 (1836); Scott v. Fields, 7 Ohio 91 (1836).

'7 Ohio 97 (1836).907 Ohio 91 (1836).

"'Interestingly, in each case the plaintiff was the vendee. It appears that the vendors were satisfied withmerely declaring forfeiture and it was the vendees who sued for specific performance.

927 Ohio at 96.



ble to guess the extent to which the court was influenced by the vendor's fulfill-ment of all terms of the contract and his offer to return the second paymentmade by the vendee. The court ended its opinion by juxtaposing strictness andequity:

On the whole, the conclusion to which we are brought is, that theparties have made time of the essence of this contract that the complai-nant has violated the agreement by failing to pay the third installment,and the bill is therefore dismissed, but with a decree for the payment backof the second installment, since that also was the stipulation of theparties. ,93

In Rummington the purchase price was to be paid in four annual install-ments, the first being due one year after the inception of the contract; therewas no down payment. The vendee failed to make the first payment and thevendor, two or three weeks later, informed the vendee that the contract wasforfeited. The vendee tendered the first payment eleven months after it wasdue, and the vendor refused it. The vendee tendered the entire amount dueunder the contract four years after the inception of the contract on the datethe fourth and final installment was to be due and the vendor refused it. Inthe interim, the vendee made what he termed "lasting and valuable improve-ments upon the land."' 9

In deciding the case, the court looked to several facts:' 95

1. The vendee never complied with the contract;

2. The vendor had promptly notified the vendee of forfeiture;

3. The property was vacant land; and

4. The improvements were made after the vendor had declared forfeitureand while the vendor was absent from the area where the propertywas located.

So again, despite the appearance of strict application of forfeiture, the courtwas dealing with a vendee it termed "to have been guilty of gross and culpablenegligence," 96 who had never tendered a prompt payment or made improve-ments while, in the court's mind, in rightful possession, and with a vendorwho had received nothing and who had promptly declared a forfeiture. As asidelight, the court in Rummington stated that a land contract was not to betreated as a mortgage,' 97 a decision that was echoed in later Ohio land con-tract cases.' 98

"'Id. at 96-97.

'7 Ohio at 98.

"'Id. at 103-04.

"'Id. at 104.19Id.

"'Contractors & Bldg. Supply Co. v. Cresap, 9 Ohio App. 73 (Hamilton Co. 1917); Economy Say. &Loan Co. v. Hollington, 105 Ohio App. 243, 152 N.E.2d 125 (Williams Co. 1957); Woloveck v. Schueler,19 Ohio App. 210 (Summit Co. 1922).

Winter, 19831

Before the Ohio Supreme Court again directly addressed the question ofland contract forfeitures, the Ohio courts of appeals denied forfeiture in twocases. In the 1919 case of Curtis v. Factory Site Co., 99 one court of appealsfound that because the vendor had accepted late payments he had waived theright to forfeiture. In the 1922 case of Woloveck v. Schueler,2°° another courtof appeals denied forfeiture on the ground that the vendor was unable to con-vey clear title. The court of appeals in Woloveck termed the trial court's orderto be "unjust, harsh and oppressive" since the vendees had been given six weeksto pay or have their interest forfeited, even though the vendor had already losta suit with a third party who had established a "substantial interest in theproperty. ' 21 ' The Woloveck court was quite willing to allow foreclosure,however, stating:

Some courts of equity have held that the provision of forfeiture inland contracts, the relation of the parties being so similar to that ofmortgagor and mortgagee, will not be enforced by strict foreclosure, butthat in land contracts, as in mortgages, if the defaulting party fails topay at the time set by the court, instead of cutting off the rights of thevendee under the contract the property will be ordered sold as uponforeclosure.

While it cannot be said that the weight of authority sustains this pro-position, we believe it to be equitable and sound. 2

To this modest beginning the Ohio Supreme Court added one more inter-pretation before the courts of appeals began actively fashioning the case lawwhich controls nonresidential Ohio land contracts today. The most cited OhioSupreme Court case in this area is the 1923 case of Norpac Realty Co. v.Schackne,20 3 where the vendee made a $12,500 down payment on a $50,000purchase price but failed to make further principal payments required by thecontract. The court allowed forfeiture, although it recognized that forfeituremight not always be equitable:

Cases may arise where equity might intervene, as where the agreed orstipulated damages are used as a guise to cover what would otherwise bea penalty, and the amount agreed upon so unconscionably large that acourt of equity would not enforce it. This is not such a case.2 '

The court went on to reject foreclosure as a remedy, saying "This was

'12 Ohio App. 148, 157 (Cuyahoga Co. 1919). This is a fascinating case involving very questionableactivity by The Factory Site Co., whose partners were the late Messrs. Squire, Sanders and Dempsey,the founding partners of the huge multi-office law firm based in Cleveland, Ohio, which still bears theirnames.

'19 Ohio App. 210 (Summit Co. 1922).

1"Id. at 220.

1"Id. at 223-24.03107 Ohio St. 425, 140 N.E. 480 (1923).

"'Id. at 429, 140 N.E. at 481.



not the contract nor the intention expressed therein." 2 5 In justifying the $12,500down payment as liquidated damages, the court acknowledged that the sumwas "large, considered in proportion to the agreed price, but it was not sodisproportionate, to extravagantly unreasonable, or so manifestly unjust as torequire equitable interference with the contract agreed to. The parties couldcontract for liquidated damages, as they did. .... "206 Despite the vaguenessof this language, which has been described as the Norpac "qualification test," 27

many courts of appeals cases, both those that have upheld forfeiture0 8 andthose that have denied it, 29 have cited Norpac for this proposition.

Norpac was, to some extent, the zenith of forfeiture in Ohio because thecourt clearly allowed for relief from forfeiture only if it would leave an "un-conscionably large" amount of money in the vendor's hands along with thereturn of the property; note, however, that the vendee was unwilling to paythe remaining part of the purchase price. Although after Norpac at least onecourt of appeals was willing to deny a vendee the value of improvements hemade in good faith,210 most appellate courts have granted forfeiture only ifthe vendee has no equities on his side. 21 1

Since Norpac, more courts of appeals have denied forfeiture than haveallowed it. The courts in several decisions have denied forfeiture on the theoryof waiver, usually the vendor's acceptance of late payments, or other ac-quiescence in untimely performance. 21 2 For example, in the 1933 case of Heggv. Sigle, 3 where the vendor had long accepted payments irregular both in timeand amount, the court of appeals said that the vendor had waived his rightto forfeiture. The court of appeals went on to say that the vendor would havehad a choice among four remedies if he had acted promptly:

First, to exercise the right under the special provision of the contract uponthe first default to exercise their election to forfeit the same and retainthe payments made up to that time as liquidated damages; Second, upona substantial default rescind the contract upon an offer to restore the con-sideration already received; Third, to have declared the balance of the

20

'd.

206Id. at 430, 140 N.E. at 481.

"'Note, Land Contracts in Ohio - The Need for Reform, 13 W. RES. L. REV. 554, 561 (1962).

'"E.g., Clukey v. Doro Realty Co., 5 Ohio Law Abs. 260 (App. Lucas Co. 1926); Economy Say. & LoanCo. v. Hollington, 105 Ohio App. 243, 152 N.E.2d 125 (Williams Co. 1957); Miami Inv. Corp. v. Baker,109 Ohio App. 334, 165 N.E.2d 690 (Montgomery Co. 1959).

"'E.g., Ardolino v. Baumann, 3 Ohio Law Abs. 374 (App. Lucas Co. 1925)."'McGriff v. Hays, 29 Ohio Law Abs. 534 (App. Montgomery Co. 1939).

"See, e.g., Clukey v. Doro Realty Co.,5 Ohio Law Abs. (App. Lucas Co. 1926); Almira v. Geren, 29Ohio Law Abs. 570 (App. Franklin Co. 1939); Economy Say. & Loan Co. v. Hollington, 105 Ohio App.243, 152 N.E.2d 125 (Williams Co. 1957); Miami Inv. Corp. v. Baker, 109 Ohio App. 334, 165 N.E.2d690 (Montgomery Co. 1959).

'E.g., Hegg v. Sigle, 14 Ohio Law Abs. 456 (App. Mahoning Co. 1933); Cleland v. Cleland, 152 N.E.2d914 (C.P. Meigs Co. 1958).

"1'4 Ohio Law Abs. 456, 458 (App. Mahoning Co. 1933).

Winter, 1983]

contract price due and payable and obtained a personal judgment therefore;Fourth, they might have foreclosed their contract upon obtaining a personaljudgment.2"4

While it is humorous to note that the court of appeals in Hegg recom-mends forfeiture upon the first default, but rescission, a much more equitableremedy in that the vendee at least gets his money back, only upon a substan-tial default, it is important to note two points. First, the court acknowledgesthe forfeiture remedy but does not mention that it would be limited by theNorpac "qualification test." Second, although other courts have rejected theanalogy of land contracts to mortgages,2' the fourth remedy suggested by thecourt is foreclosure after obtaining a personal judgment, which is much likeforeclosure of a mortgage. This 1933 court of appeals, then, acknowledgesforeclosure, a remedy previously rejected, and its reference to forfeiture mustbe tempered by the Ohio Supreme Court's decision in Norpac.

Several courts of appeals have denied forfeiture in cases where the vendeewas willing and able to pay the entire amount due,2" 6 and one court has allowedthe vendee to pay all past due installments and continue paying on the

contract.2"7 In each of these cases the courts of appeals appear to be of theopinion that the vendee's interest is too great to be forfeited since the vendeehad paid a great deal of the purchase price at the time forfeiture was assertedby the vendor. In the 1963 case of Blenheim Homes, Inc. v. Matthews, 218 thecourt of appeals made it clear that it thought a land conract should be treatedas a mortgage. The court of appeals termed its allowing the vendee to tenderback payments and be reinstated "redemption, ' ' 21 9 yet another mortgage law

term.

With a paucity of recent cases, Blenheim being the most recent, it appears

that Ohio's land contract case law is fairly progressive. Forfeiture appears tobe appropriate only upon a showing that the vendee has paid little or nothing,220

has little excuse for not paying, 221 or is unwilling or unable to pay2 22 and that

the vendor has faithfully complied with the contract 223 and consistently insisted

that the vendee comply with the contract. 224 As long as the vendee can raise

2'Id.

"'See supra note 198 and accompanying text.

1'6Ardolino v. Baumann, 3 Ohio Law Abs. 374 (App. Lucas Co. 1925); Morris v. George C. Banning,

Inc. 77 N.E.2d 372 (Ohio Ct. App. 1947); Dependabilt Homes, Inc. v. White, 117 N.E.2d 706 (Ohio Ct.

App. 1951).

'Blenheim Homes, Inc. v. Matthews, 119 Ohio App. 44, 196 N.E.2d 612 (Franklin Co. 1963).

'"Id. at 48, 196 N.E.2d at 615.

2'9Id. at 49, 196 N.E.2d at 615.

2'See supra text accompanying notes 188-97; 203-11.

"'See supra text accompanying notes 188-97; 203-1I.

22See supra text accompanying notes 188-97; 203-11.


"See supra text accompanying notes 199; 212-15.



some equity on his side, especially if he is willing to tender full performance,it appears he can avoid forfeiture. It is interesting to note, however, that thecurrent practitioner-oriented literature is remarkably vague and contradictorywith respect to land contract remedies. " 5 With this perspective, the Ohio landcontract statute becomes even more curious.

B. Post-1969 Residential Land Contracts

The Act was apparently intended to reform and make more equitableOhio's treatment of residential land contracts. One commentator has statedthat the Act was enacted by a "consumer oriented" legislature which was "pass-ing laws to protect those who do not have enough bargaining power to protectthemselves." 2 6 The commentator further characterized the Act as seeking "toprevent the land contract Vendor from taking undue advantage of the typicalimpecunious, unadvised Vendee."" 7 Thus the Ohio Legislature appeared tobe attempting to protect low-income vendees from their vendors or at leastclarifying their respective rights upon the vendee's default. 28 Although the rightsof the parties to land contracts covered by the Act may have been clarified,it is questionable that vendees were protected from their vendors.

In analyzing the Act, the best point of departure is the definitional sectionwhich establishes which land contracts the Act covers. The original section5313.01(B) of the Ohio Revised Code provided: " 'Property' means real pro-perty located in this state improved by virtue of a dwelling having been erectedon the real property where the purchase price does not exceed thirty thousanddollars." 2" As originally passed, then, the Act only affected land contractson what were probably even then middle-priced and below single-family homes,with no requirement that the vendee occupy the home.23 The Legislaturechanged this by deleting the $30,000 limitation in 1980, thus leaving the Actcontrolling all land contracts on single-family homes,2" ' still, however, regardlessof whether they were owner-occupied.

In addition to setting forth the required contents of land contracts " andrequiring recordation, " the Act strictly regulates vendees' and vendors' remedies22

Compare 54 O.JuR. 2d Vendor and Purchaser §§ 130-138.1 (1962 & Supp. 1982), which seems to sayobtaining forfeiture will pose no problem, with 3 WEST'S OHIO PRACTICE §§ 910-44 (1964 & Supp. 1980)and 2 COUSE'S OHIO FORM BOOK 848 (1960 & Supp. 1982), which raise problems, and with MCDERMOTT'SHANDBOOK OF OHIO REAL ESTATE LAW § 29.3 (1972); 3 OHIO REAL PROPERTY LAW AND PRACTICE §§ 28-111(Supp. 1980), which do not comment at all..2

Smith, Land Installment Contracts (An Analysis of the 1969 Act), Ohio State Bar Association ServiceLetter I, 1 (Dec. 1969).2 2

1id.2"Id.

12'1969 Ohio Laws 424, 424-30 (effective Nov. 25, 1969) (current version at OHiO REV. CODE ANN. §5313.01(B) (Page 1981)).2"Smith, supra note 226, at 2."'OHIo REV. CODE ANN. § 5313.01(B) (Page 1981).

...OHIO REV. CODE ANN. § 5313.02(A) (Page 1981).

."OHIo REV. CODE ANN. § 5313.02(C) (Page 1981).

Winter, 19831


upon breach by the other.1 4 The important provisions, of course, are those

establishing a vendor's remedies upon breach by the vendee.

In order to being an action for forfeiture or foreclosure on a land con-

tract covered by the Act, a vendor must first allow thirty days to pass after

any default by the vendee.235 During that thirty-day period a vendee may

reinstate the contract:

A vendee in default may, prior to the expiration of the thirty-day period,

avoid the forfeiture of his interest under the contract by making all

payments currently due under the contract and by paying any fees or

charges for which he is liable under the contract. If such payments are

made within the thirty-day period, forfeiture of the interest of the vendee

shall not be enforced.236

This section appears to allow reinstatement, that is, "all payments currently

due under the contract" should not be interpreted as providing for operation

of an acceleration clause making the entire balance under the land contract

immediately due. If one were so to interpret it, section 5313.06, which pro-

vides for notice by the vendor and a ten-day waiting period, would be

superfluous.

Section 5313.06 of the Ohio Revised Code provides in relevant part:

Following expiration of the period of time provided in section 5313.05

of the Revised Code, forfeiture of the interst of vendee in default under

a land installment contract shall be initiated by the vendor or by his suc-

cessor in interest, by serving or causing to be served on the vendee or his

successor in interest, if known to the vendor or his successor in interest,

a written notice which:(A) Reasonably identifies the contract and describes the property

covered by it;(B) Specifies the terms and conditions of the contract which have

not been complied with;(C) Notifies the vendee that the contract will stand forfeited unless

the vendee performs the terms and conditions of the contract within ten

days of the completed service of notice and notifies the vendee to leave

the premises. .... "I

Again, this appears to be a period in which the vendee may reinstate the con-

tract. If not, the language of subsection (B), "Specifies the terms and condi-

tions of the contract which have not been complied with," would be largely

superfluous if the terms and conditions were the accelerated entire balance due

under the land contract. Note, also, that the notification of "forfeiture" referred

.'OHIO REV. CODE ANN. §§ 5313.04-. 10 (Page 1981).

"'1OHIo REV. CODE ANN. § 5313.05 (Page 1981).

2'Id.

...OHio REV. CODE ANN. § 5313.06 (Page 1981).


to in section 5313.06 is misleading; section 5313.07, the foreclosure section,refers to both section 5313.05 and section 5313.06 for the procedure that mustbe followed in instituting a foreclosure action."23

If a residential land contract has not been in effect five years of more,239

and less than 20%70 of the purchase price has been paid," '° then Section 5313.08controls. Section 5313.08 provides in relevant part:

If the contract has been in effect for less than five years, in additionto any other remedies provided by law and after the expiration of theperiods prescribed by sections 5313.05 and 5313.06 of the Revised Code,if the vendee is still in default of any payment the vendor may bring anaction for forfeiture of the vendee's rights in the land installment con-

tract and for restitution of his property under Chapter 1923. of the RevisedCode . 24"

Chapter 1923. of the Ohio Revised Code gives Ohio courts the authority todeclare forfeiture. Section 1923.02 states in relevant part:

(A) Proceedings under Chapter 1923. of the Revised Code, may behad:

(7) In cases arising out of Chapter 5313. of the Revised Code. Insuch cases the court shall have the authority to declare a forfeiture ofthe vendee's rights under a land installment contract and to grant any

other claims arising out of the contract ... .

Section 1923.02(A)(7) should be read in conjunction with section 1923.09. Sec-tion 1923.09 provides in relevant part: "If he [the county court judge] findsthe complaint true, he shall render a general judgment against the defendant[vendee] in favor of the plaintiff [vendor], for restitution of the premises andcosts of suit. 24 3

When one couples section 1923.02 with section 1923.09, one of two con-

clusions has to be reached: either a trial court must declare a forfeiture whenproperly requested, a conclusion which results from a literal reading of the

statutes, or the statutes strongly favor declaration of forfeiture when the

statutory procedure is followed, a conclusion which allows the court to con-

2.OHIO REV. CODE ANN. § 5313.07 (Page 1981).

...OH10 REV. CODE ANN. § 5313.08 (Page 1981).2'°There is a conflict between § 5313.07 and § 5313.08. Section 5313.07 requires foreclosure if the land

contract has been in effect at least five years or 2007o or more of the purchase price has been paid, while

§ 5313.08 allows forfeiture if the land contract has been in effect less than five years. No commentator

or court has discussed this conflict, perhaps because the answer is readily apparent. First, § 5313.07 is

mandatory and § 5313.08 is permissive; the mandatory must control. Second, if § 5313.08 controlled,

the entire reference to land contracts on which 2007o or more of the purchase price has been paid is

meaningless; the legislature would not have included a meaningless reference in two simultaneously passedcode sections.

"'OHIo REV. CODE ANN. § 5313.08 (Page 1981).2'2OHIO REV. CODE ANN. § 1923.02(A)(7) (Page 1983).

2 OHIO REV. CODE ANN. § 1923.09 (Page 1983).

Winter, 1983]

AKRON LAW REVIEW

sider equity. As Professors Nelson and Whitman have stated in referringgenerally to forfeiture statutes: "[T] o some degree these statutes have institu-tionalized or formalized the forfeiture concept and, in so doing, may have tendedto discourage judicial interference in those situations where the vendor com-plies with the statutory forfeiture method."2 ' That is exactly what the Ohiostatutory procedure has done.

Since the Act's passage in 1969, the Ohio Supreme Court has not decideda statutory land contract case and only four published Ohio Courts of Appealscases have cited it.2" 5 Even more importantly, only one of the courts of appealscases has even dealt with the question of statutory forfeiture, the 1980 caseof Marvin v. Stemen. 11

6 In Marvin, the court of appeals concluded that evenafter forfeiture had been granted under section 5313.08 through the procedurein Chapter 1923, the vendor could bring another action for damages undersection 5313.10.247 Therefore, in the only case on statutory forfeiture the courtof appeals accepted rigid forfeiture and let the vendor bring a separate actionfor damages, hardly a result evidencing equitable considerations by the court.

Section 5313.07 requires a vendee's interest in a residential land contractto be foreclosed if 20% or more of the purchase price has been paid or if theland contract has been in effect five years or more.2"8 Section 5313.07 pro-vides in relevant part:

If the vendee of a land installment contract has paid in accordancewith the terms of the contract for a period of five years or more fromthe date of the first payment or has paid toward the purchase price a totalsum equal to or in excess to twenty percent thereof, the vendor may recoverpossession of his property only by use of a proceeding for foreclosureand judicial sale of the foreclosed property. . . In such an action, asbetween the vendor and vendee, the vendor shall be entitled to proceedsof the sale up to and including the unpaid balance due on the landinstallment contract...

Chapter 5313. of the Revised Code does not prevent the vendor orvendee of a land installment contract from commencing a quiet title ac-tion to establish the validity of his claim to the property conveyed undera land installment contract nor from bringing an action for unpaid in-stallments ... .

1"Nelson & Whitman, supra note 22, at 545 (citing Note, Forfeiture and the Iowa Installment Land Contract,46 IOWA L. REV. 786, 797 (1961)).14 Marvin v. Stemen, 68 Ohio App. 2d 26, 426 N.E.2d 205 (Lucas Co. 1980); Stratton v. Robey, 70 OhioApp. 2d 4, 433 N.E.2d 938 (Franklin Co. 1980); Stowers v. Baron, 65 Ohio App. 2d 283, 418 N.E.2d404 (Lucas Co. 1979); Garl v. Mihuta, 50 Ohio App. 2d 142, 361 N.E.2d 1065 (Lorain Co. 1975).'68 Ohio App. 2d 26, 426 N.E.2d 205 (1980).

14'Id. at 29, 426 N.E.2d at 207. Section 5313.10 (Page 1981) allows the vendor to recover damages equalto the difference between the amount paid by the vendee and the fair rental value, plus an amount fordeterioration or destruction caused by the vendee's use of the premises. See infra text accompanying notes255-56."'OHIo REV. CODE ANN. § 5313.07 (Page 1981).

"9d.

[Vol. 16:3


Although section 5313.07 prohibits forfeiture, the vendor still has otheroptions. 25 ° First, the vendor may bring an action to interpret the contract, ifthere is any dispute over the interests created and retained under the contract,by bringing a quiet title action.2"' Second, the vendor may bring an action forthe past due installments.252 It appears to be possible also to use the statute'slanguage as the basis for a suit for specific performance by the vendee if theland contract contains an acceleration clause and the vendor has declared thecontract to be accelerated. 53

Third, the vendor would be able to seek damages, during or after 5 aforeclosure action, or, for that matter, a forfeiture action, under section 5313.10,which states:

The election of the vendor to terminate the land installment contractby an action under section 5313.07 or 5313.08 of the Revised Code is anexclusive remedy which bars further action on the contract unless thevendee has paid an amount less than the fair rental value plus deteriora-tion or destruction of the property occasioned by the vendee's use. In sucha case the vendor may recover the difference between the amount paidby the vendee on the contract and the fair rental value of the propertyplus an amount for the deterioration or destruction of the property occa-sioned by the vendee's use.25

Although such an action for damages is dissimilar to a deficiency action aspart of foreclosure of a mortgage,256 it does give the vendor the opportunityto collect some damages. Further, it gives the vendor some leverage in negotiatingwith the vendee before filing a foreclosure action since it gives the vendor someclaim to damages beyond the forfeiture or foreclosure, although the languageof sections 5313.07 and 5313.08, coupled with the language of section 5313.10,prohibits a true deficiency action or any action following forfeiture other thanan action pursuant to section 5313.10. The probable reason for prohibitingany other actions is that since Ohio limits deficiencies upon mortgage foreclosureof residences, 5 this provision in the Act merely serves as an incentive for thevendor at a foreclosure sales to bid until the bidding level reaches the amountowed. Either he will get his money if someone else bids the amount owed, orif he bids the amount owed he will get the house back. He has no reason tolet another buy the house for less than the amount owed; if he does he will

1°"[TIhe vendor may recover possession of his property only by use of a proceeding for foreclosure..Id. (emphasis added)261 Id.

2521d.2"This would be consistent with non-statutory Ohio land contract law.

"See supra note 5.

."OHIO REV. CODE ANN. § 5313.10 (Page 1981).2"Deficiency judgments upon foreclosure of owner-occupiers of one- or two-family dwellings are restrictedin Ohio. See OHIo REV. CODE ANN. § 2329.08 (Page 1981).

2571d.

Winter, 19831

not get the house and will only get part of the money owed by the vendee.Section 5313.10 may be an incentive for forfeiture, if available, however. Itseverely limits a vendor's recovery beyond foreclosure. Thus, getting the housethrough forfeiture may be the best remedy.

As has already been indicated, however, for those residential land con-tracts for which foreclosure is not required an action for forfeiture is not re-quired but is allowed.2"8 Therefore, it appears that a vendor can also chooseamong the other remedies traditionally allowed by Ohio courts, rescission, suitfor money, and foreclosure,"' since section 5313.08 forfeiture is permissibleand no statutory direction is given as to other available remedies. Section 5313.10only limits a vendor's remedies if section 5313.07 foreclosure or section 5313.08forfeiture is pursued. 260

The more troubling problem is to decide what will happen when the ven-dor does choose forfeiture as his remedy. If we accept the view that Ohio courtswill interpret section 5313.08, when coupled with Chapter 1923, either to re-quire granting forfeiture when requested or to raise a very strong presumptionin favor of the forfeiture remedy, 6' then it is likely that a court will grantforfeiture as a matter of law rather than exercise its equitable jurisdiction andconsider factors normally used by Ohio courts in non-statutory forfeiture casessuch as waiver, the amount paid by the vendee, and the willingness of the vendeeto tender the total balance due under the land contract.2 62 Forfeiture is, then,truly a cold, pro-vendor remedy which may be used when there has been defaulteven though the equities favor allowing the vendee to reinstate or tender fullpayment. Unlike defaults on land contracts not covered by the Act, where Ohiocourts have clearly been inclined to give vendees equitable relief, the vendeesubject to statutory forfeiture may find himself faced with a judge who eitherfeels constrained by the statute from granting equitable relief or takes comfortin the simplicity of the statute and ignores the possibility of equitable action.

This is even more troubling when considered in light of the study on Ohioland contracts previously discussed.2 63 As the study demonstrated, there aremany land contracts for substantial amounts and short terms which fall out-side of the foreclosure requirement of section 5313.07; the danger of forfeitureis neither remote nor limited to low-income transactions. There is a clear need,therefore, either to amend the Act and make it reflect current realities or for

2 s'OHio REV. CODE ANN. § 5313.08 (Page 1981) states that "the vendor may bring an action for

forfeiture . . ." and that "the court may also grant any other claim arising out of the contract." Seealso supra note 240 for a discussion of the effects of the permissive rather than mandatory language of§ 5313.08.

."See supra text accompanying notes 213-15.

014OHIO REV. CODE ANN. § 5313.10 (Page 1981).

See supra text accompanying notes 241-44.6 See supra text accompanying notes 188-225.

'See supra text accompanying notes 77-96.

AKRON LAW REVIEW [Vol. 16:3430 "


judges to actively use their inherent equitable powers when dealing with sec-tions 5313.08 forfeitures.

V. PROPOSAL

A. Considerations

The current rationale for land contracts is quite straightforward. 1) Sellersneed to enter into land contracts and will enter into land contracts only if theycan obtain forfeiture upon default by the buyer; and 2) Forfeiture is justifiablebecause of the increased risk inherent in a land contract as most land contractvendees are low-income persons or "high-risk" persons who cannot, for variousreasons, obtain commercial financing. Another rationale, now thoroughlydiscredited, is that forfeiture is merely recognizing that time is of the essencein land contracts and then allowing the remedy of restitution of the premisesto the vendor and treating the vendee's payments to the vendor as liquidateddamages. Interestingly, however, "time is of the essence" did drop up in afew twentieth century Ohio land contract cases as the basis for deciding whetherto allow forfeiture. 264 To determine how defaults by land contract vendees shouldbe treated, it is not necessary to deal with the "time is of the essence" rationalebut it is necessary to know whether the current rationale has merit.

The first part of the rationale, that sellers need to enter into land con-tracts and will enter into land contracts only if they can obtain forfeiture, isfallacious for several reasons. First, as has been already pointed out, a seller,with rare exception, needs to sell property.26 5 The "need" may arise becausethe seller no longer needs the property, cannot afford to keep the property,desires to make a profit, desires to avoid a loss, or for many other reasons.Suffice it to say, regardless of whether the sale is by absolute deed, with orwithout a mortgage being taken back by the seller, or by land contract, in mostsituations a seller will sell, even though some sales may be on less economicallyadvantageous terms than others.

Second, even if we want to encourage sellers by allowing buyers to buywithout resort to commercial moneylenders or by giving the buyer a "gooddeal" on the terms of a loan, land contracts still are not necessary. A wrap-around mortgage performs exactly the same function as a land contract, withthe obvious differences being that in the case of the wrap-around mortgage,the buyer gets a deed and the seller's only recourse upon default is traditionalforeclosure. 266 All the economic desires of the seller and buyer are fulfilled;the only "loss" to the seller is the forfeiture remedy.26'

"'See, e.g., Norpac Realty Co. v. Schackne, 107 Ohio St. 425, 140 N.E. 480 (1923).2 See supra text accompanying notes 65-74.

...See supra note 43.

'Since Ohio requires land contracts covered by Chapter 5313 to be recorded, OHIo REV. CODE ANN. §5313.02 (Page 1981), the effect is identical except for the forfeiture remedy.

Winter, 1983]

Third, it makes no difference whether one reasons that forfeiture is allowed

so that sellers will use land contracts, or that sellers use land contracts because

they can get forfeiture. The basis for deciding whether to allow forfeiture must

be free from the idea that land contracts have a function, economic or other-

wise; it must be founded on whether forfeiture has a function that outweighsits negatives.

One can also rebut the second posited rationale that forfeiture is desirablebecause of the increased risk inherent in land contracts because of the natureof the vendee. In fact there may be no increased risk. The low down paymentmade by a low-income person may be as great or greater in relation to his in-come and net worth as a 20% or greater down payment made by a wealthierperson is to his income and net worth. A low-income person's interest to himis as worth protecting as is a wealthier person's interest to him. This argumentis quite strong as long as the vendee has some interest in the property; either

he has made not insubstantial payments or the property has appreciated dur-

ing the term of his ownership. The fact that the interest of the vendee is trivial

to the vendor begs the question because it almost always will be. For example,to a commercial mortgagee the typical mortgagor's interest is trivial. If we takethe commercial mortgagee's position in deciding what remedies he might haveupon the mortgagor's default, a strong case could be made for strict foreclosurein almost all defaults on mortgages on single-family homes.

In addition, the vendor who must foreclose is not hurt by having toforeclose. He has contracted to sell his property for a sum certain and has receiv-ed some amount toward that sum.2"8 Upon the vendee's default having toforeclose merely means either that the vendor will get his money, if a thirdparty bids at least what is owed to the vendor, or that he will be forced tocredit-bid the amount of his lien, thereby buying the property for the amountowed to him and retaining all payments made by the vendee. The end resultis the same to the vendor, but there is a great benefit to the vendee in havingthe value of the property "tested" at a public sale; if it is sold for more thanis owed to the vendor, the vendor gets his money and the vendee gets the re-mainder. Especially since Ohio's foreclosure law does not allow post-foreclosuresale redemption,269 foreclosure is no more fraught with risk than the forfeitureprocedure. The only significant loss to the vendor who is forced to forecloseis time. It is somewhat quicker to obtain forfeiture,27 ° if it is granted, thanto bring a suit for foreclosure, have the property appraised, and cause it tobe sold.

Lastly, and perhaps most importantly, to emphasize the low income trans-

"'He has received the down payment, if any, and any payments made before default.

.'OHIO REV. CODE ANN. § 2329.17 (Page 1981) (appraisal); OHIO REV. CODE ANN. § 2329.20 (Page 1981)(sale).

"'Forfeiture requires bringing an action and obtaining a judgment pursuant to OHIO REV. CODE ANN. §5313.08 (Page 1981).



action is to risk ignoring the fact that most Ohio land contract transactionsare not low income.27' It is fair to assume that few, if any, vendees expect todefault. Furthermore, few would argue that the $6,440 down payment whichthe typical Montgomery County land contract vendee would have made in 1981on his $46,000 house is trivial, and certainly the much larger interests of mostof the vendees who were above the median are not trivial, yet those interestswould be subject to forfeiture even if the vendee's default were due to causesbeyond his control.2" The sword of forfeiture is clearly too mightly in sucha case.

This is not to say, however, that forfeiture has no place and must beabolished. Equally obvious as the unfairness of forfeiture in the typical 1981Montgomery County land contract is the absurdity of forcing a vendor to bringa foreclosure action and have the property appraised and sold when the vendeehas no equity in the property.273 Forfeiture is an appropriate remedy when thedefaulting vendee has no interest in the property because the vendor is ableto quickly regain the property; in effect the vendor will obtain this possessionof the property with either forfeiture or foreclosure. The response, of course,can be that it is impossible to predict when the vendee will have no equity inthe property and that the burden is more fairly placed on the vendor in requir-ing foreclosure. This is not to say that foreclosure is the perfect remedy, becauseit may be possible to put the burden on the vendor, allow forfeiture, and befair to the vendee.

Lack of fairness is the problem with the current Ohio statute. As suggestedbefore, perhaps the proponents of the Act thought it was fair when it wasoriginally passed and was limited to properties sold for less than $30,000; theargument would have been that equities below $6,000 were not worthprotecting. 7" Even accepting that view, the $30,000 limitation was unfair becauseit did not take into consideration increases in the value of the property by in-flation and improvement. By removing the $30,000 limitation in 1980, the OhioLegislature has left the Act an anomaly, a reform statute which does not reformbut makes matters worse by serving as a basis for forfeiture without equitableconsideration. 2" The problems occur in applying the Act as written. Therefore,the solution can either be remedial action by the Legislature or equitable actionby the courts.


"'in the "typical" case, the contract would not have been in existence for five years and the $6,440 downpayment is 140o of the $46,000 purchase price. Therefore, under OHIO REV. CODE ANN. §§ 5313.07-.08(Page 1981), forfeiture is permissible. For the data supporting the 14% and the $46,000 figures, see supratext acompanying notes 78-81 and 85-87.

"'The vendee has no equity in the property when the property is worth an amount equal to or less thanthe amount owed under the land contract.1"$6,000 is 20% of $30,000, the lowest limit for required foreclosure under OHio REV. CODE ANN. §5313.07.


Winter, 19831

B. Legislative Proposals

There are several options available to the Ohio legislature in dealing with

the Act. First, most obviously, it could do nothing, happy either to allow the

statute to operate as written or to sit back and hope that Ohio's trial and ap-

pellate courts will apply the statute with a strong dose of equity. Neither of

these options should be particularly palatable to the Legislature.

The legislature should reject application of the statute as written. In 1969

the legislature intended to reform land contract law in Ohio and make it more

certain. 7 6 The 1980 amendment which removed the S3 0 ,000 limitation was yet

another reform bill, designed to extend the benefits of the Act, and especially

the foreclosure requirement of section 5313.07, to all Ohio residential land con-

tract vendees. Both bills did reform land contract law as it applied to some

land contracts. Unfortunately the bills also caused land contract law as to other

land contracts to worsen with the apparent reinstatement of strict forfeiture.2 77

If the interests for which forfeiture was reinstated were trivial, the "reform"

might be palatable; as a consequence, however, even significant interests are

now subject to forfeiture.278

The legislature should also reject sitting back and allowing the courts time

to introduce equity into the statutory scheme. Appellate court-made law is in-

herently uneven; different courts will decide similar cases differently and rarely

does a case present enough issues to allow a court to interpret and interrelate

an entire statutory scheme. In addition, many cases will be decided at the trial

level without benefit of appellate court interpretation; certainly the paucity of

cases since 1969 deciding substantive issues under the Act indicates either that

few cases have been appealed and resulted in published opinions or that the

appellate courts do not consider the issues significant enough to warrant

published opinions. 79 Perhaps the best reason for rejecting reliance on equitable

judicial action is the significant mistrust most legislators have for appellate court

judges, especially ones who "make law."

If the legislature chooses to act, the simplest reform would be to abolish

forfeiture.28 ° This is the method that the Oklahoma legislature chose and which

the Kentucky Supreme Court has chosen for Ohio's southern neighbor.8 This

change could be made simply by repealing section 5313.08 deleting the reference

to section 5313.08 in section 5313.10, changing all references to "forfeiture"

"'See supra text accompanying notes 226-28.2"'See supra text accompanying notes 248-62.1'See supra text accompanying notes 78-87.17'See Black, Hide and Seek Precedent: Phantom Opinions in Ohio, 50 U. CIN. L. REV. 477 (1981); Black,

Unveiling Ohio's Hidden Court, 16 AKRON L. REV. 107 (1982).

"'Obviously, another simple act would be to repeal Chapter 5313 and leave land contracts to case law.

It is unlikely, however, for the reasons stated concerning judicial interpretation, that once the legislature

has spoken it will consciously allow the subject matter to revert back to the appellate courts.

" See supra text accompanying notes 129-37.



in sections 5313.05 and 5313.06 to "foreclosure," and amending section 5313.07to cover all residential land contracts.2"2 With this new structure, foreclosurewould be the only way that a vendor could regain possession of the property,and land contracts would defacto have been converted to mortgages.2 83 Thiswould solve the problem of the inequitable distinction currently drawn in sec-tions 5313.07 and 5313.08. It would be fair to vendees, but it would not befair to vendors in cases in which the vendee has little or no equity.2" '

If the legislature decides to keep the forfeiture-foreclosure split, the ques-tion will be how to divide on a basis more equitable than now exists those caseswhere forfeiture would be allowed from those where foreclosure would be re-quired. The current criteria for dividing contracts required to be foreclosedfrom those which may be forfeited do not accomplish the purpose of protectingvaluable interests. The author therefore proposes four major revisions to theAct: 1) The exclusion, as a factor, of the length of time the contract has beenin effect. 2) The reduction of the percentage to 5% for requiring foreclosurewith that percentage being based on "true equity" rather than on the amountpaid on the purchase price. 3) The requirement for an appraisal to establishthe current property value and the vendee's "true equity." 4) The inclusionof an express authorization to trial judges to order foreclosure in any case whereequity dictates, even though the statute technically allows forfeiture.

First, any qualifying period for requiring foreclosure should be abolished.The five-year limitation in section 5313.07 is nonsensical; a contract could bein effect for a five year period in which the value of the property, and hencethe vendee's equity, dropped or it could be in effect for a two year period wherevalues increased by 10% or more per year. 25 The length of time the land con-tract has been in effect may affect the sentimental interest of the vendee inhis house. However, the interests being protected are inherently economic; timedoes not necessarily strengthen economic interests.

The second revision, lowering the percentage for required foreclosure toa 507 "true equity, 28s6 also should make the statute much more fair. The cur-

2 .Section 5313.07 would then read:The vendor of a land installment contract may recover possession of his property only by use

of a proceeding for foreclosure and judicial sale of the foreclosed property as provided in section2323.07 of the Revised Code, and only after expiration of the periods of time prescribed by sections5313.05 and 5313.06 of the Revised Code. In such an action, the vendor shall be entitled to theproceeds of the sale up to and including the unpaid balance due on the land installment contract.

The second and third paragraphs of current § 5313.07 should then be made the new § 5313.08.

"3The only differences, of course, are that the vendor would still have legal title and the vendor wouldbe unable to obtain a deficiency judgment, as § 5313.10 would still limit a vendor to damages only ifthe vendee had paid on the contract less than the fair rental value of the property during the vendee'spossession plus any deterioration or destruction of the property caused by the vendee. See OHIO REV. CODEANN. § 5313.10 (Page 1981).2s'See supra text accompanying note 273.

2 'Real estate prices have fallen during many periods in the twentieth century and certainly the late 1970'sshowed the possibility for rapid increases."s6See infra text accompanying notes 290-91.

Winter, 1983]

rent 20% limitation is just too high. Even putting aside the argument thatwhether an interest is worth protecting should be determined in relation to thevendee and not the vendor of the value of the land,"8 7 20% of the median 1981land contract sales price, $46,000, is still $9,200. A $9,000 down payment istoo much to allow to be forfeited, particularly in relation to what that $9,000means to the typical buyer of a $46,000 house.

The problem is that any percentage may be unfair in some situations. Con-sider the highest sales price uncovered by the study, $500,000. Even 1% wouldbe $5,000, an interest one may feel uncomfortable in allowing to be forfeited.This argument can be rebutted, of course, because even if foreclosure is re-quired, that 1 % interest will most likely not be protected; most foreclosuresales are made to mortgagees who bid no more than what they are owed." 8

Other percentages could be justified, but 5% seems to treat both sidesfairly by letting vendors declare forfeiture in cases where the cost of foreclosureand sale and the inevitable lower price a foreclosure sale brings would surelyexceed the vendee's equity. There is a fairly large number of cases where thevendee's equity is less than 5%; for example, 14% of the land contracts studiedhad down payments, or vendees' initial equities, of 4% or less of the purchaseprice. 89 The vendee would be free from forfeiture unless his true equity wasless than 5 %; in the land contracts studied, for example, the median land con-tract vendee would only need to make a down payment, or have a true equity,of $2,700, 5% of $46,000.

The third revision, requiring an appraisal to establish the current valueof the property and the vendee's "true equity," involves two changes. Thevendee's interest is not measured by the amount he has paid on the land con-tract but by his "true equity," the amount he has paid adjusted by any changein the value of the property caused by improvements or appreciation or deprecia-tion in value. Second, the relevant property value is not the purchase price butcurrent market value. Determining this value will require an appraisal of theproperty upon the vendor's institution of a forfeiture action. While requiringan appraisal may seem cumbersome, this is exactly what is currently requiredin Ohio foreclosure actions.2 90 Once an appraisal is completed, it is simple todetermine the vendee's percentage interest29' and whether the vendor's actionmust be for foreclosure or may be for forfeiture. Two other things are alsoaccomplished by requiring an appraisal to establish current value. If the vendee'sequity is 5% or more, and foreclosure is required, the required foreclosureappraisal has already been done, while if the vendee's equity is less than 5%

"'See supra text accompanying note 273."'Nelson & Whitman, supra note 22, at 452.

"'9See Appendix A.

'OHIo REV. CODE ANN. § 2329.17 (Page 1981).

" This interest is calculated by subtracting the amount owed from the appraised value and dividing theresult by the appraised price: (Appraised price - Current balance) - Appraised Price = Equity.



the court now has an independent basis for deciding on any equitable relieffrom statutorily allowed forfeiture.

Finally, there should also be explicit authorization to a trial court to grantequitable relief in cases where forfeiture is allowed; without it the proposed5% limitation, or any percentage limitation, is potentially as inequitable as the

current 2007o. If 50/o is applied to the highest purchase price in the study, $500,000it results in a minimum protectable initial equity of $25,000, an amount which,in most cases, it would be inequitable to allow to be forfeited. A trial judgeshould be able to so find and force the vendor to foreclose rather than seekforfeiture.

If the division between forfeiture and foreclosure is maintained, two further

problems should be addressed. First, it should be made clear that a vendormay choose foreclosure even if forfeiture is permissible in his case. Althoughthis is arguably the case under section 5313.08,292 it should be made explicit;there is no reason not to allow a vendor to opt for foreclosure instead offorfeiture.

Second, the vendee should be given the express right to redeem. Once it

is decided to allow forfeiture in some case, equity dictates that if the vendeeis willing to pay the entire amount due, along with interest and the vendor'scosts, he should be allowed to do so. In order to parallel Ohio's mortgage law,

which allows redemption by a mortgagor in default up to judicial confirma-tion of a foreclosure sale,293 the most practical time to cut off the right of

redemption for a vendee in default would be the date of the entry of a final

judgment of forfeiture. The vendee would then have the absolute right to give

the vendor what the vendor has a right to expect, his money.""

The changes to Chapter 5313 necessary to carry out the author's proposalare fairly straightforward. The first sentence in section 5313.07 would be revisedto read:

If the vendee of a land installment contract has an equity of five percent

or more in the property, the vendor may recover possession of his pro-perty only by use of a proceeding for foreclosure and judicial sale of theforeclosed property as provided in section 2323.07 of the Revised Code.

Section 5313.08 would be revised by changing the opening phrase to state "Ifthe contract is not required to be foreclosed under section 5313.07 of the RevisedCode. . . ." The section would be revised further by adding the followingsentences at the end:

The vendor may choose to bring a foreclosure action pursuant to section

"2See supra text accompanying notes 258-59.

.'Onto REv. CODE ANN. § 2329.33 (Page 1981).

9"'This continues the analogy of land contracts to mortgages which is appropriate since a land contractis in effect a mortgage with forfeiture as a remedy.

Winter, 19831

5313.07. If the vendor chooses to bring a forfeiture action, the court maynonetheless determine that forfeiture would be an inequitable penalty asapplied to the vendee and order foreclosure of the contract pursuant toSection 5313.07 of the Revised Code. Where forfeiture is ordered, thevendee shall have the right to redeem the property, up to the date of theentry of final judgment of forfeiture, for the amount due under the in-stallment land contract plus the vendor's costs of suit.

Finally, subsection (F) should be added to section 5313.01 to provide the defini-tion of "equity": "(F) 'Equity' means the difference between the value of theproperty, as determined by appraisal pursuant to section 2329.17 of the RevisedCode, and the amount owed by the vendee to the vendor on the installmentland contract."

Although 5% is obviously an arbitrary number, the important parts ofthe proposal can be carried out regardless of what percentage is chosen. First,any evaluation of the vendee's interest must be based on current value andindependent appraisal is the only even near accurate method of determiningit. Second, the court must have the ability to deny forfeiture and requireforeclosure in cases where the court determines that forfeiture is not equitable.Finally, the vendee must be able to redeem up to the entry of a final judg-ment. The proposed procedure does all of that and still gives the vendor whoseeks a forfeiture judgment, particularly if the vendee defaults in the legal action,a fairly efficient remedy; the only added burden is appraisal, an existing re-quirement in every Ohio foreclosure.

The last consideration for the Legislature in reforming the Act is whetherto extend its coverage to all land contracts. The clear national trend is towardsthe mortgagization of land contract law.295 While protecting owners of dwell-ings is admirable is it not also admirable to protect individuals owning triplexesand living in one unit and owners of small businesses who buy their stores onland contract? Perhaps the answer is that Ohio's fairly progressive judiciallycreated land contract law will protect them.296 If that were a sufficient answer,however, the Act would be unnecessary. The answer should be that all landcontract vendees deserve the small protection of an appraisal and potentiallyrequired foreclosure. This could be easily provided by revising section 5313.01(B)to read: "(B) 'Property' means real property in this state." With that addi-tional change, Ohio land contract law would become one of the fairest in thecountry.

C. Judicial Proposal

Simply put, the judicial proposal is encouragement for the courts to refuseto relinquish their equitable powers in the face of the Act. In fact, the courts





should do so whether or not the Legislature chooses to amend the Act. Threespecific suggestions are made.

First, a trial court faced with an action for forfeiture under section 5313.08should never grant forfeiture without some evidence of the fairness of grantingforfeiture. Such evidence could include an independent appraisal, the vendor'sor his expert's appraisal, or the vendee's or his expert's appraisal. Certainlyif the vendee defaults on the forfeiture action, the court should feel duty-boundat the time the request for default is presented to it to determine in some mannerthe nature of the vendee's interest, whether by the vendor's testimony or thetestimony of a third party.2"7 If the court is unconvinced that forfeiture is appro-priate, it should refuse to grant it and should require the vendor to resort toother remedies, such as damages, rescission, or foreclosure, as may be provid-ed by statute.298

Although it is arguable that a properly requested forfeiture must begranted,299 a court should look to the permissive language of section 5313.08that "[t]he vendor may bring an action for forfeiture of the vendee'srights .... "30 To argue that a court is required to grant forfeiture by the termsof section 5313.08 as implemented by section 1923.02 and section 1923.091is to ignore the inherent equity powers of Ohio trial courts. The presence ofthose powers mandates that a court not take inequitable action in carrying outits functions.

Second, on carrying out its role in forfeiture cases a court should alwaysfeel free to find waiver by the vendor in order to avoid a harsh result.30 2 Ifthe vendor has allowed the vendee to make late payments or skip paymentscompletely, a court should hold that the vendor has waived his opportunityfor forfeiture. In essence, to obtain forfeiture a vendor must have compliedwith all statutes and the contract and have insisted that the vendee do the same.

Third, and perhaps most important, a court should allow a vendee toredeem up to the entry of final judgment. There is no reason to deny a vendeethis right. Even if a vendee has intentionally breached the contract the vendorhas no right to expect anything more than that for which he has contracted,full payment under the contract. The vendee should, of course, be requiredto pay, in addition to the principal balance due, interest and all the vendor'scosts in attempting collection on the land contract. Like California, 03 Ohio2"Ohio Rules allow a court to make such a finding when a demand for for default judgment has beenmade. OHIO R. Civ. P. 55(A).2 See supra text accompanying notes 250-55; 258-59.

...See supra text accompanying notes 261-62.3.OHio REV. CODE ANN. § 5313.08 (Page 1981) (emphasis added).

" See supra text accompanying notes 241-44.

"'Just as courts do in non-statutory forfeiture cases. See supra text accompanying notes 212-15.

"'See MacFadden v. Walker, 5 Cal. 3d 809, 488 P.2d 1353, 97 Cal. Rptr. 537 (1971) and text accompanyingnotes 143-50.

Winter, 1983]

should be comfortable in allowing the parties the true benefit of their bargain

and give true meaning to what has become a tired cliche, "equity abhors a

forfeiture."

VI. CONCLUSION

Ohio's current statutory scheme controlling defaults on residential land

contracts is a step in the right direction in that it requires foreclosure of many

contracts involving a vendee's significant interests which would be protected

from forfeiture. The clear national trend is to require foreclosure or other

methods of protecting a vendee's valid interests.

The need for change is great because under current economic conditions

valid interests lack protection and may need protection in the near future. Unless

there is a substantial change in interest rates and the economy in general, many

vendees may find themselves unable either to make their monthly payments

or refinance their three or five year land contracts at the end of the contracts'

terms. The results may be disastrous.

The Ohio legislature has the opportunity to enact a few simple amend-

ments with far-reaching implications to make the statutory scheme a truly mean-

ingful reform. The current basis for requiring foreclosure should be changed

to requiring foreclosure if the vendee has a small true equity in the property.

The equity should be measured at the time of suit. In addition, the legislatureshould give trial courts the explicit right to deny forfeiture in appropriate cases

which fall within the statutory parameters allowing forfeiture. Finally, the

legislature should give the vendee the explicit right to redeem up to the entryof a final judgment of forfeiture if forfeiture is granted.

If the legislature fails to act, the courts should use their inherent equitable

powers to lessen the harshness of the statutory scheme. Trial courts should

evaluate the equities in each request for forfeiture and deny forfeiture wheneverit would be more equitable to force the vendor to choose another remedy such

as foreclosure, rescission or damages. In addition, since the vendor is requesting

strict performance of contract terms, trial courts should require that the ven-

dor have insisted on strict performance by the vendee; if not, the vendor should

be held to have waived his opportunity for forfeiture. If forfeiture is granted,equity dictates that a willing vendee should be allowed to redeem.

If the legislature and the courts treat land contracts more equitably, as

recommended, Ohio's land contract law will clearly be one of the most pro-

gressive in the country. It will protect the valid interests of vendees while giv-

ing vendors the opportunity for forfeiture when the vendor lacks a valid in-terest. That, of course, should be the goal of all states.


Winter, 19831

PurchasePrice

FileNumber

January

2 AO6 B08

19 D0424 BO32 A0342 D0756 C0565 C0772 A0180 A12

February

82 B0188 A0193 C06

100 A02109 B06111 Bo116 B03124 A01127 A05131 AO1136 E07144 A09146 C06149 C06152 E01156 A09

March

158 E01160 C04163 B07168 C03172 D05

AmountFinanced

$106,00060,90060,233.54

260,00043,90030,00033,50085,00042,50036,000

57,00053,00021,00071,90012,00022,000

115,00080,00048,00069,860.1946,90058,00012,00035,000

320,00033,000

85,00070,50047,50036,50011,500

Term -In Years

$ 90,00050,70010,233.54

230,00041,90024,00030,00065,00034,50030,000

45,00050,00015,00064,90011,00022,000

100,00060,00038,00052,860.1940,90050,0009,000

35,000243,00030,000

73,00050,50034,50036,00010,500

InterestRate

11%11%7%9%

11%12%10%10.5%11.5%11.5%

9.5%12%13%11.75%6%9%

10.75%13.5%10.75%9.75%

10.5%12%11%10%11.5%10.5%

11%11%10.5%7%

13%


APPENDIX A

LAND CONTRACTS STUDIED

APPENDIX A (continued)

File Term - Purchase Amount Interest

Number In Years Price Financed Rate

177 B08 3 45,000 35,000 0

183 E06 29 70,000 60,000 11%

188 A09 2 64,000 44,000 9.5%/o

193 B03 0 9,000 8,000 100%o

201 C12 3 13,000 10,000 4.66707o

206 B03 1 17,000 14,000 1407o

212 B06 3 75,400 57,900 13.50o

227 E02 5 38,000 31,500 10070

232 C12 2 78,500 63,500 10.5076

234 E09 5 25,000 23,500 10%0

237 C02 0 150,000 120,000 120%0

241 A09 3 39,000 35,000 10.5076

249 D08 5 50,000 43,000 110o

April

253 E05 3 15,000 13,000 100o

256 C07 71 495,000 380,000 110%0

263 E03 5 25,900 23,400 10.75%

270 C09 15 500,000 361,000 9%

278 A12 3 43,000 35,000 100o

285 D02 3 32,000 28,800 120o

293 C08 5 75,000 65,500 10%

298 BIO 5 39,000 34,000 9.750o

304 B08 5 39,500 34,000 100o

312 C09 3 38,900 32,900 100o

320 A07 0 25,000 22,500 120o

330 E03 1 49,688 29,688 -0-

341 A05 5 70,000 28,000 10.750o

350 B09 5 40,000 35,000 110

May

361 C03 5 84,000 77,000 10.5%

366 CIO 6 12,000 11,500 1000

373 C04 5 65,500 50,000 10.250o

375 D03 0 50,500 50,500 13%

381 D06 0 11,900 11,700 100%0

386 COI 0 68,500 57,100 10.250o

390 D09 '/2 46,500 38,130 10%0

395 B12 34,900 26,175 1000




File Term - Purchase Amount Interest

Number In Years Price Financed Rate

400 D05 3 65,000 55,000 11%

407 ClI 0 19,999.61 19,999.61 9.5%

412 A04 0 45,000 30,000 8%

421 AO1 4 83,500 65,500 11%

428 A08 2 30,900 25,338 10%

430 D12 0 48,000 34,832.17 9.75%o

434 D07 5 78,500 63,500 10%

439 B03 0 29,900 28,000 11%

442 E04 49,000 45,000 11%

452 C02 0 9,000 8,000 10%

June

462 C12 V2 63,900 49,600 14%

466 E02 0 21,000 20,000 11%

472 D02 2 48,900 41,000 9%0

476 B11 5 55,000 49,500 10%

483 B06 2 42,900 38,700 12%

488 A01 5'/2 62,500 56,500 12%

495 D07 1 74,751.66 74,727.71 12%

502 Dl1 5 6,000 6,000 -0-

504 A07 11 100,000 95,000 10%

513 A01 3 37,500 22,500 9%

519 C04 0 76,000 61,000 12%

523 A01 3 80,000 65,000 12%

529 D02 30 140,000 110,000 12%

532 Bh 0 15,500 13,500 10%

536 B07 5 32,000 31,700 10%

539 D06 1 125,000 93,750 10.75%

545 D03 2 15,000 15,000 12%

557 A01 25 56,900 36,900 8.75%

562 D02 5 92,500 67,500 10.5%

570 D12 5 78,900 71,900 9.5%

July

579 B07 5 38,500 14,500 12.5%

583 B08 3 37,500 32,500 13%

591 B08 0 23,000 22,000 9%

595 E09 5 137,500 120,000 10%

602 A02 5 70,000 58,000 12.5%

Winter, 19831

AKRON LAW REVIEW


FileNumber

604 A01609 A10613 AO1618 DlI622 C03627 A07631 B12635 D12640 B01646 E04651 D06657 B03660 AO662 E05666 D1I673 D04677 E07

August

680 D02684 D02689 E05694 COI700 D08706 C11711 C06716 D06723 BI1726 D10734 D06739 C08743 Bll747 A10755 DIO762 A05765 A08768 E08771 D04775 Bll

Term -In Years

03

23057

122

2530220242

3

20

202443

1015

7031

10203030402

PurchasePrice

90,00065,00049,90040,00039,90014,000

165,00054,5009,000

62,0003,000

44,90034,0003,500

28,00064,23035,000

64,9005,000

31,00044,573.9994,00016,50060,50035,000

115,00090,00027,453.5371,500

125,000not given

35,00060,00061,00065,50025,00082,500

AmountFinanced

72,00057,50028,60028,41434,90014,000

115,00046,500

8,00052,0002,500

35,90027,000

3,30028,00049,43030,500

51,0004,000

30,00029,165.1375,20013,50040,50028,00070,00070,00020,203.5361,50060,000

not given33,95042,00040,00055,50023,50069,500

InterestRate

12%12%8.25%9.75%

11%12%9%

12%12%11%3%

14%12.5%12%-0-

11.4%11%

12%-0-

13%8.75%

13%-0-

12%10%12%9.5%

11.5%10.5%16%

not given11%12%12%10%12%12%

[Vol. 16:3



File Term - Purchase Amount InterestNumber In Years Price Financed Rate

September

778 A04 4 66,000 58,000 12%

781 A06 5 149,000 134,000 -0-784 D1O 3 25,900 23,400 10%

788 C07 0 150,000 125,000 12%

794 A06 1 55,000 45,000 11%

800 B05 5 40,000 35,100 12.5%

808 D04 5 32,000 32,000 8.2319%

814 A04 4 12,000 10,800 10%

818 D02 2 57,900 52,110 10%

824 AOl 2 32,000 30,000 13%

827 E08 5 72,000 61,000 12%

832 D08 0 18,000 17,000 1407o

838 D05 5 12,900 10,900 11%

843 AOl 2 86,000 77,400 10%

848 D03 8 77,000 42,000 12%

852 BIO 3 37,000 32,000 11%

859 B12 27 54,000 43,561.61 10.5%

867 E03 4 25,500 23,000 9%

October

874 BO 31 59,000 55,400 807o

878 B09 3 85,900 73,000 11.5%

886 A08 2 22,000 20,000 12%

891 C08 5 6,500 6,000 10%

896 D03 4 41,500 38,300 9.5076

903 D1O 3 71,000 63,000 11%

909 C02 21 25,000 24,000 16%

914 D04 10 10,500 8,500 10%

922 B1 5 35,000 34,000 12%

925 CIO 2 17,000 15,500 13.50%6

931 D05 3 57,000 53,300 10%

936 D1O 12 43,000 20,000 12%

939 DOI 0 35,000 25,000 10%943 C03 5 12,900 11,400 12%

948 A07 5 24,500 21,000 12%

957 C12 2 85,000 70,000 12%

Winter, 1983)


File Term - Purchase Amount InterestNumber In Years Price Financed Rate

November

965 A04 30 42,000 33,600 12%970 C04 1 63,000 63,000 10o00974 COI 3 61,000 52,400 10.75%978 C08 3 42,000 42,000 -984 C08 0 47,200 46,200 13%988 D04 10 68,900 48,900 11%996 A05 30 67,000 57,000 12%

1000 C08 3 67,000 55,000 11%1006 D09 1 57,700 50,169.43 14%1011 E03 30 40,000 36,000 13%1014 C02 1 39,000 37,500 12%1018 E04 5 71,000 55,400 11.5%1025 A08 2 100,000 75,000 10.5%1029 C03 3 49,000 46,000 11%1032 E09 0 13,000 12,000 7%1041 E08 0 9,500 9,000 7.5%

December

1049 C08 2 52,550 52,100 -1057 A06 3 76,000 58,500 10%1066 E06 5 12,000 7,000 10001075 E07 2 15,000 10,000 120761080 D09 5 43,000 33,000 12.5%1085 A01 5 43,500 38,500 12%1090 D07 0 11,500 11,500 6%1101 A05 0 34,524.07 29,500.58 8.5%1109 E03 10 65,000 58,000 11%1115 E05 0 5,000 5,000 15%1121 B09 3 70,000 50,000 10%1128 EIO 0 34,500 13,213.72 10.5%


Documents

Forfeiture of Residential Land Contracts in Ohio: The Need for